News / Economy

Obama, Congressional Leaders Have Days to Craft Fiscal Deal

Obama Cuts Vacation Short as Fiscal Cliff Deadline Loomsi
December 27, 2012 12:41 AM
President Barack Obama and members of Congress are cutting their holiday breaks short, returning to Washington to resume negotiations aimed at avoiding a looming fiscal crisis. With just days to go before the so-called "fiscal cliff," many worry the political one-upmanship is already causing harm to the US economy. Mil Arcega has more.
Watch a Related Report by Mil Arcega
U.S. President Barack Obama returns to Washington Thursday to resume difficult negotiations with congressional leaders to avert or postpone tax increases and mandatory government spending cuts at the end of the year.

Curtailing what was to have been a two-week vacation with his family in Hawaii, Obama will assess progress made by lawmakers and his own aides toward achieving this goal he set last Friday.

"To work towards a package that prevents a tax hike on middle class Americans, protects unemployment insurance for 2 million Americans, and lays the groundwork for further work on both growth and deficit reduction." Obama said.

The president has said he remained hopeful about the possibility of achieving a larger comprehensive deficit reduction package.  But chances for this appear exceedingly slim.

That leaves the most likely scenario:  a measure in the Democratic-controlled Senate to extend tax cuts for families earning $250,000 or less, adding extended benefits for unemployed Americans, and a mechanism to temporarily avoid $109 billion in government spending cuts.

Any Senate-passed measure would have to win the support of at least 26 Republicans and all 191 Democrats in the House of Representatives.  House Speaker John Boehner faced a rebellion last week by anti-tax Republicans who blocked his alternative plan to raise taxes on Americans earning $1 million or more.

In a statement Wednesday, Boehner said it is up to the Senate to act, adding that "lines of communication" remain open.

Stephen Hess, an analyst with the Brookings Institution, says he believes a deal will emerge.

"Something is bound to go through.  The Congress may have awful problems, but they are not going to set off a recession, which is what would happen if they couldn't reach agreement on taxes, and also on the huge cuts that are guaranteed to start immediately with the new year as well," Hess said.

An alternative scenario would have lawmakers return in January to reverse tax increases and further delay mandatory government spending cuts.  Republicans could then say they voted only to decrease tax rates.

Without a deal, tax cuts approved by Congress under former Republican President George W. Bush -- which were temporarily extended in 2010 by President Obama -- would expire January 1.  

Hess observes that so far, financial markets have been remarkably quiet as politicians struggle to forge a deal.

"There has been a wait and see attitude in the markets.  It has been a year, 2012,  in which generally the American markets have done well, so there is a little wiggle room there, and they have not chosen to follow th­e politicians over the cliff -- yet," Hess said.

Princeton University economist Alan Blinder is concerned about the impact on the U.S. economy when leaders are unable to reach a compromise.

"An economy which was just limping out of the worst recession since the 1930's, then gets another body blow, sees its government act like a bunch of clowns, may see borrowing costs go up because of lack of confidence in the financial markets," Blinder said.

According to a recent poll, Americans watching the Washington power struggle play out are more pessimistic than they were about chances for a deal.

A Gallup Poll conducted before Christmas showed just 50 percent believe a deal to avert the fiscal cliff is likely, a sharp decrease from several weeks ago.  Forty-eight percent said they were doubtful an agreement can be reached.

You May Like

Isolation, Despair Weigh on Refugees in Remote German Camp

Refugees resettled near village of Holzdorf deep in German forestland say there is limited interaction with public, mutual feelings of distrust

Britons Divided Over Bombing IS

Surveys show Europeans generally support more military action against Islamic State militants, but sizable opposition exists in Britain

Russia Blacklists Soros Foundations as 'Undesirable'

Russian officials add Soros groups to a list of foreign and international organizations banned from giving grants to Russian partners

This forum has been closed.
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
With HIV, Can We Get to Zero?i
Carol Pearson
November 29, 2015 1:23 PM
The theme of this year's World AIDS Day is "Getting to Zero." The U.N. says new HIV infections have been reduced by 35 percent since 2000 and AIDS-related deaths are down by 42 percent since the peak in 2004. VOA's Carol Pearson takes a look at what it might take to actually have an AIDS-free generation.

Video With HIV, Can We Get to Zero?

The theme of this year's World AIDS Day is "Getting to Zero." The U.N. says new HIV infections have been reduced by 35 percent since 2000 and AIDS-related deaths are down by 42 percent since the peak in 2004. VOA's Carol Pearson takes a look at what it might take to actually have an AIDS-free generation.

Video Political Motives Seen Behind Cancelled Cambodian Water Festival

For the fourth time in the five years since more than 350 people were killed in a stampede at Cambodia’s annual water festival, authorities canceled the event this year. Officials blamed environmental reasons as the cause, but many see it as fallout from rising political tensions with a fresh wave of ruling party intimidation against the opposition. David Boyle reports from Phnom Penh.

Video African Circus Gives At-Risk Youth a 2nd Chance

Ethiopia hosted the first African Circus Arts Festival this past weekend with performers from seven different African countries. Most of the performers are youngsters coming form challenging backgrounds who say the circus gave them a second chance.

Video US Lawmakers Brace for End-of-Year Battles

U.S. lawmakers are returning to Washington for Congress’ final working weeks of the year. And, as VOA's Michael Bowman reports, a full slate of legislative business awaits them, from keeping the federal government open to resolving a battle with the White House over the admittance of Syrian refugees.

Video Taiwan Looks for Role in South China Sea Dispute

The Taiwanese government is one of several that claims territory in the hotly contested South China Sea, but Taipei has long been sidelined in the dispute, overshadowed by China. Now, as the Philippines challenges Beijing’s claims in an international court at The Hague, Taipei is looking to publicly assert its claims. VOA’s Bill Ide has more from Beijing.

Video After Terrorist Attacks, Support for Refugees Fades

The terrorists who killed and injured almost 500 people around Paris this month are mostly French or Belgian nationals. But at least two apparently took advantage of Europe’s migrant crisis to sneak into the region. The discovery has hardened views about legitimate refugees, including those fleeing the same extremist violence that hit the French capital. Lisa Bryant has this report for VOA from the Paris suburb of Cergy-Pontoise

Video Syrian Refugees in US Express Concern for Those Left Behind

Syrian immigrants in the United States are concerned about the negative tide of public opinion and the politicians who want to block a U.S. plan to accept 10,000 Syrian refugees. Zlatica Hoke reports many Americans are fighting to dispel suspicions linking refugees to terrorists.

Video Thais Send Security Concerns Down the River

As Thailand takes in the annual Loy Krathong festival, many ponder the country’s future and security. Steve Sandford reports from Chiang Mai.

Video Islamic State Unfazed by Losses in Iraq, Syria

Progress in the U.S.-led effort to beat Islamic State on its home turf in Iraq and Syria has led some to speculate the terror group may be growing desperate. But counterterror officials say that is not the case, and warn the recent spate of terror attacks is merely part of the group’s evolution. VOA National Security correspondent Jeff Seldin has more.

Video Belgium-Germany Border Remains Porous, Even As Manhunt For Paris Attacker Continues

One of the suspected gunmen in the Nov. 13 Paris attacks, Salah Abdeslam, evaded law enforcement, made his way to Belgium, and is now believed to have fled to Germany. VOA correspondent Ayesha Tanzeem makes the journey across the border from Belgium into Germany to see how porous the borders really are.

Video US, Cambodian Navies Pair Up in Gulf of Thailand

The U.S. Navy has deployed one of its newest and most advanced ships to Cambodia to conduct joint training drills in the Gulf of Thailand. Riding hull-to-hull with Cambodian ships, the seamen of the USS Fort Worth are executing joint-training drills that will help build relations in Southeast Asia. David Boyle reports for VOA from Preah Sihanouk province.

Video Uncertain Future for Syrian Refugee Resettlement in Illinois

For the trickle of Syrian refugees finding new homes in the Midwest city of Chicago, the call to end resettlement in many U.S. states is adding another dimension to their long journey fleeing war. Organizations working to help them integrate say the backlash since the Paris attacks is both harming and helping their efforts to provide refugees sanctuary. VOA's Kane Farabaugh reports.

VOA Blogs

World Currencies


Rates may not be current.