VIDEO: Obama Fiscal Crisis Statement

Senate to Try One Last Time for Fiscal Crisis Solution

Senate leaders from both sides of the aisle vowed late Friday to scramble over the weekend to produce a new bill aimed at averting the fiscal crisis, on the heels of a high-stakes White House meeting -- seen as the last chance to come together before the tax-hike deadline next week. 

Though the meeting did not yield a breakthrough or any "concrete" proposals, Senate Democratic Leader Harry Reid and Republican Leader Mitch McConnell [photo] gave taxpayers a glimmer of hope by announcing on the floor that the Senate would adjourn Saturday to allow staff to work on a bill. McConnell said he hopes they can come forward with a recommendation as early as Sunday. 

"We need to have everybody step back a bit," said Reid, who called the meeting "very constructive." 

The pledge to work on a new bill is by no means a solution to the sweeping set of tax hikes set to hit Jan. 1, followed by steep spending cuts. Lawmakers still have to write the bill, and produce something that can pass both chambers. 

President Obama, speaking from the White House briefing room late Friday, voiced a dose of doubt about the Senate leaders' final push for a deal. 

He said he's "modestly optimistic" but that if Reid and McConnell fail, the Senate should allow an up-or-down vote on a scaled-back proposal the president is pushing. 

"The hour for immediate action is here, it is now," Obama said. "We're now at the last minute, and the American people are not going to have any patience for a politically self-inflicted wound to our economy. ... We've got to get this done." 

Considering how late this effort is getting underway, lawmakers easily run the risk of missing the deadline and causing at least some uncertainty with Americans' tax bills starting next week. 

The developments late Friday, though, at least showed Reid and McConnell were beginning to work together. And it marked a decision by lawmakers that the Senate should make the first move -- for days, House Speaker John Boehner has insisted that the Senate act, but Reid has resisted and put the onus on the House. 

It's unclear what the new bill would entail. It appears the Senate wants to tweak the Obama plan, which would include an extension of current tax rates for most Americans -- but potentially adjust it so fewer earners see a tax hike, and add a provision dealing with a looming expansion of the estate tax. 

The debt ceiling, which Obama wants increased, would not be part of this bill. And a senior White House official admitted it is unclear how a looming set of spending cuts would be addressed. 

The White House official said that during the meeting, Reid and McConnell jumped in and offered to draft a new plan after Obama told them he thought his scaled-back proposal could pass both chambers. 

The president's plan is a far cry from the kind of "grand bargain" lawmakers were shooting for just a few weeks ago -- something that would narrow the deficit, overhaul the tax code and set the country on a course to curb its entitlement spending, all while averting massive tax hikes and spending cuts. 

Instead, Obama wants a bill that primarily nixes the tax hikes for families making under $250,000. He has pushed that particular provision for months, though Republicans have adamantly opposed raising taxes on those making above $250,000. 

Obama's proposal would also extend unemployment benefits for roughly 2 million people expected to lose them next year, and deal with "other outstanding issues." 

Obama referred to those other issues last week when he called for laying "the groundwork for future growth and deficit reduction," which presumably would be a commitment to return next year and draft broader tax and entitlement reform. 

Read more: http://www.foxnews.com/politics/2012/12/28/obama-congressional-leaders-give-talks-to-avert-fiscal-crisis-one-last-try/#ixzz2GP9Z4LtK

U.S. Week Ahead: Deal or no deal, the damage's already done

ReutersVideo

What leaders said after financial cliff meeting

politicalticker

Washington (CNN) - Congressional leaders spoke Friday after meeting about the fiscal cliff with President Barack Obama at the White House.

Congressional leaders attending the meeting was Senate Majority Leader Harry Reid, Senate Minority Leader Mitch McConnell, House Speaker John Boehner, and House Minority Leader Nancy Pelosi. Vice President Joe Biden was to be in attendance, the White House said, and an administration official said Treasury Secretary Timothy Geithner would attend as well.

Obama was set to make a statement at 5:45 p.m. ET.
McConnell and Reid spoke on the Senate floor.
Reid said, “we had a constructive meeting. We certainly hope that something positive will come from that. The republican leader and I and our staffs are working and we’ll see what we can come up with. We shouldn’t take a long time to do that. …
“If we come up with something, it’s not that easy. We’re dealing with big numbers and some of the stuff that we do is somewhat complicated. But I think it was a very positive meeting,” he said. “There was not a lot of hilarity in the meeting, everyone knows how important it is. It was a very serious meeting and it took an extended period of time as you all know waiting for us.”
McConnell spoke immediately after Reid, saying, “I share the view of the majority leader. We had a good meeting down at the White House.
“We are engaged in discussions, the majority leader and myself and the White House, in the hopes that we can come forward as early as Sunday and have a recommendation that I can make to my conference and the majority leader [Reid] can make to his conference and so we’ll be working hard to try and see if we can get there in the next 24 hours,” he said. “And so I’m hopeful and optimistic.”
Boehner’s office issued a statement which said he “reminded the group that the House has already acted to avert the entire fiscal cliff and is awaiting Senate action.”
“The leaders spent the majority of the meeting discussing potential options and components for a plan that could pass both chambers of Congress,” the statement read. “The Speaker told the President that if the Senate amends the House-passed legislation and sends back a plan, the House will consider it – either by accepting or amending. The group agreed that the next step should be the Senate taking bipartisan action.”
In a paper statement, McConnell’s office also pointed to legislation which had passed the House.
“While the House already passed legislation in August to prevent tax hikes (a proposal Sen. McConnell supports), the President and Congressional leaders today agreed that the Senate must now act,” the statement read. “This will require a bipartisan approach. Members of the Senate will continue to work toward producing a bipartisan package in a timely manner to protect American taxpayers and jobs from a massive tax hike in January.”
Pelosi said the meeting was "constructive" and "candid."

White House Meeting Ends With No Sign of Breakthrough

foxnews

If Americans were looking to Washington on Friday to unveil a bold new solution for averting the fiscal crisis, they didn't get it.
President Obama, at a last-ditch meeting with congressional leaders just days before sweeping tax hikes take effect, presented a recycled version of the scaled-back proposal he pitched last week.
There was little sign of a breakthrough, as lawmakers left shortly after 4 p.m. Stocks on Wall Street dove at the close of the day, amid fears that the tax increases along with steep spending cuts will hit Jan. 1.
According to one source familiar with the White House meeting, Obama pushed lawmakers to either bring his proposal for a scaled-down bill to a vote or put forward a counterproposal of their own.
As she returned to Capitol Hill, House Democratic Leader Nancy Pelosi suggested Obama is trying to get the Senate to act first. "I think it moved us forward," she said of the meeting, without offering specifics about what was discussed.
Senate Majority Leader Harry Reid called it "very constructive."
"We hope it will bear fruit," the Democratic leader said, though he cautioned there was "no concrete proposal."
The president's plan is a far cry from the kind of "grand bargain" lawmakers were shooting for just a few weeks ago -- something that would narrow the deficit, overhaul the tax code and set the country on a course to curb its entitlement spending, all while averting massive tax hikes and spending cuts.
Instead, Obama wants a bill that primarily nixes the tax hikes for families making under $250,000. He has pushed that particular provision for months, though Republicans have adamantly opposed raising taxes on those making above $250,000. Obama's proposal would also extend unemployment benefits for roughly 2 million people expected to lose them next year, and deal with "other outstanding issues."
Obama referred to those other issues last week when he called for laying "the groundwork for future growth and deficit reduction," which presumably would be a commitment to return next year and draft broader tax and entitlement reform.
The latter idea, though, would stir deep skepticism in Congress -- the last big budget deal in the summer of 2011 ended precisely with such a commitment, which in turn ended in failure and the fiscal crisis facing the country today.
The immediate challenge for negotiators, though, will be to craft a plan that does enough to spare most Americans a big hike without doing so much as to complicate the bill's passage. There are a host of expiring provisions next year -- from Medicare rates to doctors to payroll tax cuts -- that some lawmakers hoped to address before the end of the month. The more items added to the bill, the trickier it gets to pass it.
Lawmakers have been hesitant to predict whether Congress will be able to arrive at any solution.
Earlier Friday, Senate Finance Committee Chairman Max Baucus, D-Mont., said: "I think it all comes down" to the White House meeting.
Senate Budget Committee Chairman Kent Conrad, D-N.D., continued to push for a "grand bargain," though that does not appear to be what Obama is pushing in the near-term.
Senate Republican Leader Mitch McConnell, ahead of the meeting, called on leaders to "get serious."
"We are obviously running out of time here," he said.
Lawmakers effectively have fewer than two working days to pass legislation. While the Senate is in session, the House does not return until Sunday afternoon.
Between now and Jan. 1, Congress has just a handful of options for sparing taxpayers. Aside from the scaled-back "Plan C" being offered by Obama, lawmakers could simply pass a short-term extension of current rates -- buying more time to work out an agreement. Lawmakers might have to do this even if they reach an agreement by the weekend -- because of the sheer time it would take to write that bill and bring it to the floor.
Or Congress could let the tax hikes happen, only to retroactively deal with them next year. The Boston Globe reported Friday that the IRS may delay the impact of tax hikes by holding off on telling employers to change how much they withhold from workers.
House Republican leaders, though, still want the Senate to pass their bill that extends current rates for everyone. And Senate Democratic leaders still want the House to pass their bill letting taxes rise on households making more than $250,000.
The latter, though, would probably only pass in the House with a bloc of mostly Democrats. According to Politico, Boehner told his rank-and-file Thursday that he's "not interested" in passing a bill that way.
Fox News' Ed Henry and Chad Pergram and Fox Business Network's Rich Edson contributed to this report.

Read more: http://www.foxnews.com/politics/2012/12/28/obama-congressional-leaders-give-talks-to-avert-fiscal-crisis-one-last-try/#ixzz2GODQ2AXS

What happens to you if we go over the fiscal cliff

NBC News/ Allison Linn 

Some lawmakers are back in Washington hoping to hammer out a last-minute deal to avert the so-called fiscal cliff, but so far it seems that there’s more name-calling than deal-making going on.

If no deal is ever reached, it will be more than just a political headache. Americans also could feel considerable pocketbook pain as taxes rise, unemployment benefits are cut off and an array of smaller changes take effect.

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The cumulative effect on Americans’ wallets could be enough to dent significantly the already weak economy. Federal Reserve Chairman Ben Bernanke has said the combination of tax increases and spending cuts could be enough to send the nation back into recession.

That’s the worst-case scenario, and despite the considerable gridlock, most experts expect that Congress and the president will eventually come to some sort of deal. Experts also say that even if no deal is reached by Jan. 1, retroactive fixes and other dealmaking could prevent the most harmful effects from ever hitting most Americans.

Related: Consumers, businesses brace for fiscal cliff impact

Still, the Tax Policy Center, a nonpartisan think tank, says that nearly 90 percent of households would be affected if we go over the fiscal cliff completely and no deal is reached.

A stalemate would have very specific effects on certain groups of taxpayers, such as students, parents and married couples who have benefited over the past decade from certain tax law changes passed under the Bush and Obama administrations.

But the Tax Policy Center says that on average, taxes would go up for every income group, from the poorest taxpayers to the most wealthy:

• Americans in the lowest 20 percent of the income scale could pay an average of about $400 more in taxes.
• Middle-income households could pay about $2,000 more in taxes, on average.
• The top 20 percent of taxpayers could pay about $14,000 more a year in taxes, on average.
• The 1 percenters could pay an average of $120,000 more in taxes.

Here’s a look at some of the biggest issues likely to affect the largest groups of taxpayers if Congress cannot make a deal.

Tax rates will go up: If no deal is made, taxpayers can expect their tax rate to rise no matter what income group they fall in, said Roberton Williams, senior fellow with the Tax Policy Institute. That’s because previously passed rate cuts would expire.

“Everyone who has taxable income will see a tax increase because of the rates,” Williams said.

Payroll taxes: For the past two years, the employee’s share of taxes paid for Social Security has been set at 4.2 percent instead of the previous level of 6.2 percent. That temporary tax cut would expire without a new deal, meaning almost everyone’s taxes would rise by 2 percentage points.

Translation: Your paycheck would be a little bit smaller.

“That’s the thing that people will see first,” Williams said.

Alternative Minimum Tax:  The Alternative Minimum Tax  was originally designed so that wealthy taxpayers would be forced to pay a minimum level of taxes no matter what. But because it was not created to account for inflation, over the years it has threatened to affect an ever-bigger group of people.

Congress has previously passed temporary “patches” to keep lower-income households from having to pay more taxes. If no deal is reached this year, the latest patch would expire and the Internal Revenue Service says around 30 million additional taxpayers would become subject to the AMT.

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Of course, every taxpayer’s individual circumstances are different. To see how your family’s tax rates could be affected, you can check out the Tax Policy Center’s individualized tax calculator.

Taxes aren’t the only pocketbook problem Americans could face if a deal isn’t reached, because so much government spending is tied up in reaching a deal. But the most widespread effect would probably be on people who have been unemployed for a long time.

Unemployment benefits: About 2.1 million unemployed Americans are scheduled to lose federally funded unemployment compensation if Congress can’t reach a deal to extend the benefits plan by the end of the year. President Obama has said he’d like to see those benefits extended as part of a fiscal cliff deal.

The federally funded unemployment benefit extensions were introduced in 2008 while the country was in the depths of the recession. The extended benefits kick in after an unemployed person has exhausted his or her 26 weeks of state benefits. The exact amount of additional compensation depends on the unemployment rate in the person’s home state.

The unemployment rate has fallen sharply in recent months, but long-term unemployment remains a major problem. About 4.8 million people, or 40 percent of the total number of people who were unemployed in November, had been jobless for 27 weeks or more.

No scaled-back fiscal cliff plan, White House says

 

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Buy, sell, hold or panic! No deal in sight!

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Boehner calls House back to Washington on Sunday

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Today at Noon: Wall St extends losses; volatility jumps

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Huffington Post: ‘President Clinton’s Policies Sent The Economy Seriously Off Course’

finally someone realizes the origin of the present mess.

-------------------------------

foxnews

By Dean Baker

The truth is often painful but nonetheless it is important that we live in the real world. Just as little kids have to come to grips with the fact that there is no Santa Claus, it is necessary for millions of liberals, including many who think of themselves as highly knowledgeable about economic matters, to realize that President Clinton's policies sent the economy seriously off course.

In Washington it is common to tout the budget surpluses of the Clinton years as some momentous achievement, as though the point of economic policy is to run budget surpluses. Of course the point of economic policy is to produce an economy that improves the lives of the people in a sustainable way. Clinton badly flunked this test.

theblaze.com

The Clinton economy was driven by a stock bubble. This is not a debatable point. The ratio of market-wide stock prices to corporate earnings was well over 30 to 1 at the peak of the bubble in 2000. This is more than twice the historic average.

Keep reading on huffingtonpost >>

Obama’s Regulatory Cliff Draws Near

frontpagemag/ Arnold Ahlert

garyhasissues.com

Many Americans believe the biggest problem the nation currently faces is the so-called fiscal cliff. Unfortunately, the fiscal cliff is nothing compared to the avalanche of new regulations that will be coming in 2013. That Americans remain unaware of this ominous development is understandable. The most transparent administration in history ignored the provisions of the Regulatory Flexibility Act and a subsequent series of executive orders that require the semi-annual release of all regulations under development or review by some 60 departments, agencies, and commissions. Thus, the April 2012 and October 2012 deadlines came and went without compliance. Now that the election is over, Americans will discover just how all-encompassing Obama and his big-government zealots intend to be.

The scope is staggering. According to the Competitive Enterprise Institute, the overall regulatory burden has reached $1.8 trillion annually, and $215.4 billion in compliance costs have been added in 2012 alone. The OMB’s Office of Information and Regulatory Affairs website reveals that 4,100 new regulations are in the pipeline, with more than 400 aimed at small businesses, whose compliance costs will exceed those of their larger competitors by 36 percent.

Unsurprisingly, the Environmental Protection Agency (EPA) will be taking the lead role in flexing the administration’s regulatory muscles. Proposals to significantly expand the Clean Water Act will give the EPA power over virtually every body of water in the nation, including farm ponds, streams, and even storm water runoff, all of which could seriously impact family farmers and small businesses. More restrictive requirements for controlling ozone emissions could cost $90 billion annually and trigger the potential loss of millions of jobs. The designation of coal ash as a “hazardous substance” will substantially increase energy costs, adding another $79 billion to $110 billion to the regulatory tab, and eliminating thousands of jobs in Pennsylvania, West Virginia, Missouri, and Ohio. A new rule that tightens allowable levels of so-called fine particulate matter will be added to the mix as well, making it far harder for local governments to issue new manufacturing permits.

Keep reading on frontpagemag >>

HARRY REID: 'It Looks Like' We'll Go Over The Cliff Because Of Boehner's 'Dictatorship'

businessinsider/ Brett LoGiurato

Senate Majority Leader Harry Reid/ CNN

Senate Majority Leader Harry Reid said this morning that it "looks like" Congress will fail to come to a deal to avert the year-end fiscal cliff, blaming the failure on House Speaker John Boehner's "dictatorship" running the lower chamber.

"It looks like that's where we're headed," Reid said. "I don't know, time-wise, how it can happen now."

It's not exactly a surprise — leaders left Washington last week without any imminent signs of a deal in the making. But it's a grim warning just days before tax hikes and automatic spending cuts begin to take effect.

Reid opened the Senate session by launching into a lengthy criticism of the House and Boehner, saying he "seems to care more about his Speakership" than making a deal on the cliff.

The House is being run "by a dictatorship of the Speaker," Reid said. He accused Boehner of waiting until the election of the Speaker on Jan. 3 to get involved with negotiations. And he urged the lower chamber to pass the Middle Class Tax Cut Act, which the Senate narrowly passed in July. The bill made permanent all of the Bush-era tax cuts on incomes of less than $250,000 for couples and $200,000 for individuals.

Reid also slammed the House for not being in session on Thursday. He said that instead of being in Washington, Republicans are "out watching movies."

"They had to have a conference call," he said.

Reid's comments come a day after Boehner put the onus on the Senate on making the next move in fiscal cliff negotiations.

Read more: http://www.businessinsider.com/fiscal-cliff-harry-reid-negotiations-obama-boehner-taxes-cuts-spending-2012-12#ixzz2GGr4KwHP

How The Media's Fiscal Cliff Hype Could Backfire Massively

businessinsider

Joe Weisenthal 

In theory, all of the media hype about how the US will go down into a canyon of flames on January 1 if we hit the Fiscal Cliff should help lawmakers come together to hammer out a deal.

Today's New York Post cover is an overdramatized version of what most media are doing with their countdown clocks and so forth.

The problem becomes: What happens if there's no insta-tragedy on January 2, when everyone comes back to work and the market opens?

What if the market doesn't budge?

What if life for most people seems totally normal?

The problem then is that you have the debt ceiling fight coming up soon thereafter, and there there's a real likelihood that failure to raise it would result in catastrophe.

Even in 2011, there were a fair number of people who thought that not lifting the debt ceiling wasn't a big deal, and that everyone was just spinning scare stories. If we go over the Cliff and nothing happens, the skeptics will multiply this time. There'd be no credible pressure from anyone.

This isn't a first order worry. The big worry is austerity via lower spending and higher taxes. But in terms of addressing a real issue, all this hype isn't helping.

Read more: http://www.businessinsider.com/the-medias-fiscal-cliff-hype-could-backfire-massively-2012-12#ixzz2GGqTEfAl

FORGET THE DEFICIT: Here's The Real Reason Liberals Want To Hike Taxes On The Rich

businessinsider/Joe Weisenthal 

A common argument you hear from conservatives is that raising taxes on the rich is a joke of a deficit reduction proposal, because it hardly makes a dent in the deficit.

According to CNBC, reverting to Clinton-era levels would just get you about $40-$45 billion in the first year.

GOP Congressman Tom Price has gotten a lot of attention for saying it would only fund government for 8 days... so what's the point?

So what is the point?

Well, it's not really about deficit reduction at all.

Zachary Goldfarb at The Washington Post has a great piece on how Democrats once vehemently opposed the Bush tax cuts, but are now trying to permanently preserve all of them for the vast majority of taxpayers. One big reason is that the economy has changed, and there's a recognition among virtually everyone that the economy is too weak to let taxes rise above the board.

But as for raising taxes on the rich...

What’s more, income inequality has been growing. Sparing the middle class higher taxes while requiring the wealthy to pay more would tip the scales slightly in the other direction.

“The reason there’s been this movement toward broad consensus on renewing the tax cut for working- and middle-class families is that will give us a sharper progressivity in the tax system that is very much desired by Democrats and progressives who’ve seen an income distribution more and more distorted toward the wealthy,” said Betsey Stevenson, former chief economist in Obama’s Labor Department and a professor at the University of Michigan, who added that taxes may have to rise even more than currently contemplated to meet the country’s needs.

The point about making the tax code more progressive doesn't get talked about enough, but when discussing changing marginal tax rates, this should be the main issue.

The truth of the matter is that it's not going to be that easy closing the deficit using the tax code, or even via lower spending. Deficits are closed via more growth, and that's about it.

As this chart shows, a great predictor of deficits, going back decades, is the unemployment rate. The tax code has much less to do with it than people think.

But the tax code can help create more progressive outcomes, and at a time when inequality continues to rise, addressing that inequality is a major liberal goal. Actually it's not just a liberal thing. Most people in most societies feel that extreme inequality is problematic.

For those unfamiliar with it, here's a look at the Gini Coefficient (which measures societal income inequality; higher = more unequal) for the U.S.

So yes, tax hikes on those making $250K or more won't dent the deficit much.

But that's at a minimum a secondary issue in the tax discussion. It's all about trying to do something about inequality. Debt and deficits so thoroughly dominate politics, however, that politicians usually frame it through that.

Read more: http://www.businessinsider.com/fiscal-cliff-obama-heres-the-real-reason-liberals-want-to-raise-taxes-on-the-rich-2012-12#ixzz2GGpLcJiM

FISCAL TALKS FREEZE: Lawmakers Refuse to Make First Move to Avert Crisis

foxnews

You go. No, you go.
That's the refrain on Capitol Hill, as House and Senate leaders each refuse to make the first move in crafting a bill that can avert the fiscal crisis scheduled to hit next week. President Obama, en route from Hawaii, will land in Washington Thursday morning -- but with Republicans and Democrats not exactly talking to one another, it looks like Thursday will be another wasted day as the odds mount of a historic tax hike setting in Jan. 1.
Though Obama, before leaving on vacation Friday, expressed hope that both sides could come together on a scaled-down package that at least averts most of the tax increases, no compromise bill has emerged. Instead, the leaders of the House and Senate returned to familiar talking points late Wednesday, as part of a drawn-out waiting game with huge consequences. The Senate is waiting on the House, the House is waiting on the Senate, and Americans are waiting to see what will happen to their paychecks in 2013.
Senate Democratic Leader Harry Reid, in a brief written statement, urged Republicans to pass a Senate bill that raises taxes for households making above $250,000 and preserves current rates for everyone else.
"It is time for House Republicans to put middle class families first by passing the Senate's bill to protect 98 percent of Americans from a tax hike on January 1. The Senate bill could pass tomorrow if House Republicans would simply let it come to the floor," Reid said. "The Senate has already rejected House Republicans' Tea Party bills, and no further legislation can move through the Senate until Republicans drop their knee-jerk obstruction. Right now, the Senate bill is the only bill that can become law, and House Republicans owe it to middle class families to let it pass with Democratic and Republican votes."
House Speaker John Boehner earlier made the same argument about two Republican-passed bills in his chamber -- one extending current tax rates for everyone; the other rearranging the $110 billion in spending cuts set to hit next year.
"The House has acted on two bills which collectively would avert the entire fiscal cliff if enacted. Those bills await action by the Senate," he and other Republican leaders said in a statement. "If the Senate will not approve and send them to the president to be signed into law in their current form, they must be amended and returned to the House."
They said the House would either accept those bills or continue to amend them, adding: "The House will take this action on whatever the Senate can pass, but the Senate first must act."
With each side refusing to make the first move, it may be incumbent upon Obama to give a negotiated bill one last try, presuming he can get all the stakeholders in the same room. Also unclear is what role Senate Republican Leader Mitch McConnell, who has stayed largely quiet throughout this debate, may play in pushing for an 11th-hour deal.
A new Gallup poll, though, showed Americans are growing increasingly pessimistic about the chances for an agreement in roughly five days. The Senate is in session Thursday for unrelated business, but the House is not. House Republican members have been told they would be given 48-hours notice if they are called back. Considering the time it takes to write and pass a bill of this magnitude, the best route for averting tax hikes may be to pass a short-term extension of current rates with the goal of approving a larger package early next year.
Lawmakers have not even agreed to that, though. Without a deal, more than $500 billion in tax hikes are scheduled to go into effect. This includes increases in income tax rates, investment tax rates, the estate tax, the payroll tax and other provisions. Budget cuts to the Pentagon and other federal agencies threaten to hit government contractors. All together, a prolonged failure to avert these policies could cause another recession, economists warn.
While Reid is in Washington, Boehner spokesman Michael Steel said Thursday that Boehner has not yet left Ohio. Steel said "lines of communication remain open" -- but, reiterating the speaker's position, he said "communication is no substitute for Senate action."

Read more: http://www.foxnews.com/politics/2012/12/27/house-senate-leaders-frozen-on-fiscal-talks-as-odds-tax-hike-rise/#ixzz2GGSVUWB5

US Treasury to take steps to avoid debt ceiling

NBC/

WASHINGTON -- The U.S. Treasury on Wednesday announced the first of a series of measures to delay hitting the government's $16.4 trillion borrowing limit. Without those steps, the debt ceiling would be hit on Dec. 31. 

The government is facing a crunch on the debt ceiling because the issue has become ensnarled in talks to avoid some $600 billion in tax hikes and spending cuts due to begin in early January. Failing to raise the debt ceiling could cause the government to default on its debt.

To cut government spending and delay bumping up against the debt ceiling, the Treasury will suspend issuance of state and local government series securities -- known as "slugs" -- beginning on Dec. 28.

Investments in a government employee pension fund will also be suspended, along with some other measures, although Treasury did not give dates for when these other measures will begin.

"These extraordinary measures ... can create approximately $200 billion in headroom under the debt limit," Treasury Secretary Timothy Geithner wrote in a letter to congressional leaders.

Normally, these measures would buy the Treasury about two months time before hitting the debt ceiling, Geithner said in the letter. But a series of planned tax hikes and spending cuts due to take effect in early January could give Treasury further time if they take effect as scheduled, he said.

"Treasury will provide more guidance regarding the expected duration of these measures when the policy outlook becomes clearer," he said.

The instruments known as slugs are special low-interest Treasury securities offered to state and local governments to temporarily invest proceeds from municipal bond sales. They have been suspended several times over the last 20 years to avoid hitting the debt ceiling.

Many analysts believe the measures available to the Treasury can stave that date off into late February.

The U.S. Congress typically authorizes government borrowing in a two-stage process, first drafting plans to spend more than it raises in tax revenues. Every few years, it raises a limit on government borrowing to accommodate annual deficits, a process that this year has become ensnared by the contentious budget talks in Washington. 

Information from the Associated Press and Reuters was included in this report.

Markets slip on treacherous fiscal cliff

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The Cost of Spending: In search of solutions to America's debt crisis

By Bret Baier 

We're always hearing from politicians about the urgency of the nation's fiscal situation. The debt is over $16 trillion. Deficits -- the annual shortfall -- are persistently north of $1 trillion. 

Those figures are constantly in the background, reminding both parties that whatever the solutions, they need to find and act on them quickly. And the solutions will have to be big -- because the problem is massive. 

Experts agree that drastic changes are needed to return America to a fiscally sustainable path. But it's a long road to get there -- in the face of $1 trillion deficits, closing the gap will be done one million, one billion, at a time. 

Here are a few ideas: 

• Shutting down the post office on Saturdays would help save about $3 billion. 
• Changing Medicare eligibility from 65 to 67 would bring back $6 billion, according to one estimate. 
• A plan proposed by Sen. Tom Coburn that cuts non-essential defense programs would save $7 billion. 
• Capping tax deductions at $25,000 would retain $68 billion. 
• And proposed additional taxes on the top 2 percent of earners would bring in $82 billion. 

Hypothetically, if all these proposed solutions were to be enacted, the U.S. would spend $166 billion a year less than it does today. 

That's a lot. But not when it's compared with how much is spent in a year -- $3.5 trillion in 2012. And it's even less when compared with the total national debt. 

Economist John Taylor, who wrote the book "First Principles: Five Keys to Restoring America's Prosperity," said lawmakers could solve the problem by focusing on a few key areas. 

"The problem was created in Washington. It can be fixed in Washington," he said. "I have to think in terms of economics what the best thing to do (is) and for me that's to gradually reduce spending as a share of GDP, that means reduce the growth rate." 

He continued: "That's what a family would be doing if they were borrowing too much, they'd just go back to where they were before the problems began. ...  Number two, we have an opportunity now for, to reform our tax code, that will also stimulate economic growth and work on this high unemployment rate. And longer term, there are some reforms in Social Security, Medicare in particular, that can reduce really what is expected to be an explosion of spending into something that's more sensible, more sustainable." 

Former Democratic Sen. Evan Bayh narrowed the solutions down to two categories. 

"Number one, getting our future rates of entitlement spending under control, particularly in the health care arena. Those are the big numbers," he said. "Secondly, even modest increases in the rate of growth in the economy, even .5 percent more per year." 

He said that over a decade or more, that growth "generates huge money which makes it so much easier to solve this problem in a way that's politically palatable." 

Alice Rivlin, Bill Clinton's budget director and one of the only people to serve on both of the most prominent deficit-reduction commissions in Washington, agreed that the growth in health care entitlements must be slowed. 

She added: "You have to put Social Security back on a firm foundation and you have to raise more revenues through a reformed tax code. Everybody who's looked at it comes out that way. ... But (lawmakers) are caught in this political game of blaming each other." 

Economists urged lawmakers not to squander the opportunity to correct course. 

"I'm actually convinced that now is a better time than ever," Arthur Brooks, president of the American Enterprise Institute, said. "We have a golden opportunity to do some of the things that we should have done a really long time ago. We have an opportunity to actually shape the entitlement crisis. ... The key thing that we have to remember is not to let this slip away."

Read more: http://www.foxnews.com/politics/2012/12/21/cost-spending-in-search-solutions-to-america-debt-crisis/#ixzz2FnhCNL00

America's Debt Crisis and Obama in Hawaii

philly.com

President Obama and his family arrived Honolulu for a Christmas vacation in Hawaii early Saturday, just hours after he urged congressional leaders to take one last shot at crafting a bill that can prevent tax hikes on middle-class Americans.

The president, who optimistically claimed he would be back "next week" to handle a budget deal, touched down in Air Force One shortly after midnight and left quickly with his family for their vacation home.

Friday's pitch by Obama to jumpstart talks on a deficit-reduction deal came as he and virtually everyone involved were preparing to bolt Washington for the holidays.

House Speaker John Boehner, who until several days ago was Obama's negotiating partner, headed home to Ohio on Friday. 

It remained unclear whether they really would return next week to strike a deal. 

Time is running short before sweeping tax hikes kick in Jan. 1 -- followed by aggressive automatic spending cuts -- and the two left in their wake a cacophony of recriminations over stalled efforts to avert the looming fiscal crisis and growing doubts about the prospects for compromise. 

After a Republican package collapsed in the House the night before, the president said Friday he remained optimistic. "I actually still think we can get it done," Obama said, after meeting briefly with Senate Democratic Leader Harry Reid and speaking separately with Boehner. 

Obama specifically called on Congress to pass a bill that extends current tax rates for middle-class Americans, which he typically defines as those making under $250,000. He said such a package should also extend long-term unemployment aid and lay "the groundwork for further work on both growth and deficit reduction." 

"That's an achievable goal. That can get done in 10 days," he said, adding he would "immediately" sign it into law before Jan. 1. "It's that simple." 

The problem, though, is that Republicans are adamantly opposed to a bill raising taxes on families making over $250,000, claiming it would hurt the economy and particularly small business. 

The array of proposals and avenues for a deal all have encountered serious issues. 

Talks between Boehner and Obama aimed at crafting a compromise hit a wall earlier this week. The House has resisted the kind of bill that Obama and Senate Democrats are pushing. And the Senate has resisted a Republican bill that would extend current tax rates for everyone. 

Adding to the complications, Boehner's "Plan B" to extend current rates for all but those making more than $1 million was pulled from the floor Thursday night after it failed to garner enough Republican support. 

Obama said Friday that "nobody can get 100 percent of what they want," as he urged Republicans to come toward him. 

Boehner spokesman Brendan Buck said, in response, that "we remain hopeful he is finally ready to get serious about averting the fiscal cliff" and that Boehner would return to Washington after Christmas "ready to find a solution." 

But Boehner, while signaling a willingness to resume talks with Obama, also wants the Senate to act first. 

On the heels of his "Plan B" tax bill failing the night before, Boehner did not offer any specific proposal Friday. While expressing interest in a broad agreement, he added: "How we get there, God only knows." 

As lawmakers peeled away from the Capitol, they delivered their parting shots. Each party was calling on the other to step up with a solution, but the tone was hardly in keeping with the holiday spirit. And it hardly stoked optimism that both sides were working toward an agreement. 

House Democratic Leader Nancy Pelosi claimed Republicans were "taking food out of the mouths of babies and seniors" with their proposals. 

Reid accused Boehner of wasting a week on a "futile political stunt." 

Boehner complained that, "at some point, the United States Senate has to do something." 

Boehner acknowledged Friday that his "Plan B" did not have enough support to pass. "It's not the outcome that I wanted, but that was the will of the House," he said. 

He called on Democrats to step up and get serious about spending cuts, noting they control the Senate and White House. House Republican Leader Eric Cantor said "we stand ready to continue a dialogue with this president to actually fix the problem." 

The reality remains that any package to avert the crisis must pass both chambers. Boehner may be facing the balancing act of his political career. Democrats claimed that without a robust coalition of Republicans behind him, Boehner would have to compromise with them. 

But if the speaker goes too far to the left, he could easily lose Republicans. 

Boehner's Republican allies were fuming Thursday night at the course of events. 

"It's the same 40 chuckleheads that screwed this place up," Rep. Steve LaTourette, R-Ohio, said, referencing the conservative lawmakers who were opposed to raising tax rates at any level. "(Boehner's) done everything to make nice to them." 

During an emergency conference meeting Thursday night, Fox News is told that Rep. Mike Kelly, R-Pa., jumped up and implored members to reconsider. He asked: "Is this the best we can do? Is this the best we can do for John Boehner?" 

The House was able to pass a plan Thursday to replace automatic spending cuts set to hit next month. The House bills, though, had been adamantly opposed anyway by Democrats in both chambers.

Read more: http://www.foxnews.com/politics/2012/12/22/what-now-plan-b-stall-out-leaves-fiscal-crisis-solution-in-doubt/#ixzz2Fng9LzxK