http://www.businessinsider.com/fiscal-cliff-live-2012-12
After a LONG day, the Senate has overwhelmingly voted to approve a Fiscal Cliff deal, sending legislation for final approval in the House.
There was a little nervousness this evening that liberals might not be on board the deal, but the bill passed easily 89-8.
* * *
http://www.businessinsider.com/fiscal-cliff-live-2012-12
11:31 PM | LATE VOTE
NRO's Robert Costa says vote could occur between 1-3 AM.
10:54 PM | Vote still coming tonight
Harry Reid says there will be a vote tonight, but that they're just waiting for a CBO score.
http://www.zerohedge.com/news/2012-12-31/senate-reaches-agreement-cliff-deal-vote-come-debt-ceiling-left-untouched
Senate Agrees To Kick Can For Two Months; Breached Debt Ceiling Untouched
Well, we appear to be nearing a mini 'delay' deal of some sort. The agglomeration of headlines continues with Senate deals on and off, Biden proclaiming victory yet Senate Democrats are said not have consented (yet).
- *WHITE HOUSE SAID TO REACH BUDGET DEAL WITH REPUBLICANS
- *SENATE FISCAL CLIFF VOTE POSSIBLE BY 10:30 P.M.: REID SPOKESMAN
- *SENATE DEMOCRATS SAID NOT TO HAVE CONSENTED TO DEAL
State of the idiocy appears to be: The 2-month sequester delay: cuts would come half from defense & half-non-defense. 2 month window to give all sides time for bigger deal.No debt ceiling resolution. Tax rises for 400/450k, Cap Gains/Dividend up to 20%, small rise in estate tax and restrictions on personal tax deductions. Simple - as we have said for a while - assuming this passes seamlessly, this is nothing but a can-kicking delay to the 'extraordinary' debt ceiling date - two words - Stop.Gap. And in two months, it's not just the sequester but the debt ceiling too. Enjoy your night.
Via AP:
A Democratic aide says the White House and congressional Republicans have reached an agreement to avert the so-called fiscal cliff.The measure would extend Bush-era tax cuts for family incomes below $450,000 and briefly avert across-the-board spending cuts set to strike the Pentagon and domestic agencies this week.Vice President Joe Biden was set to sell the agreement to Senate Democrats at a meeting at the Capitol on Monday night.The aide required anonymity because he wasn't authorized to speak publicly.
and....
http://www.businessinsider.com/fiscal-cliff-live-2012-12
8:53 PM | The Washington Post reports that Democrats and Republicans have finally reached a deal on the fiscal cliff
Via WaPo:
According to Democratic aides, Vice President Biden is on his way to the Capitol to explain the details of the pact he negotiated with Minority Leader Mitch McConnell, and a vote on the package could be held by 10:30 p.m., beating a midnight deadline. White House officials gave in on the last issue, how to handle estate taxes, yielding to GOP wishes, aides said. The House will begin considering the bill tomorrow, with final passage in the next day or two.
8:44 PM | CNN reporter Dana Bash tweets that Senate Democrats will caucus at 9:15 p.m.
Biden is expected to arrive at the Capitol around that time.
Senate braced for late night, journalists less so
I've got the lyrics to Auld Lang Syne and some cocktail sausages on sticks on my desk.
Updated
Details continue to drip out regarding the details of a possible deal between Republicans and Democrats. John McCain has been chatting to Reuters, and reckons the deal, which could be voted on by the Senate tonight, would include a two-month delay in automatic federal spending cuts.
Those cuts were due to begin this week. Some $24bn of spending cuts elsewhere would cover the delay, while unemployment benefits would be extended for one year.
While McCain spilled his beans Republican Senator Bob Corker was telling reporters that it is "highly likely" the Senate will vote on the bill tonight, echoing Senator Jon Kyl's confidence from just a few moments ago.
7:21 PM | Biden is meeting with Democrats to try to coax them into agreeing to a deal
Meanwhile, the AFL-CIO is urging Democrats not to agree to a deal that raises the tax threshold above $250,000 and allows Republicans to renegotiate on the debt ceiling.
6:45 PM | Biden will head to the Hill at 7 p.m.
News outlets are reporting that Vice President Joe Biden is planning on heading to Capitol Hill at 7 p.m. in order to break a tie if there is a tie on the still tentative fiscal cliff deal.
http://www.zerohedge.com/news/2012-12-31/senate-deal-apparently-short-needed-support
Senate Deal "Apparently Short Of Needed Support"
- Joe Biden
- Reuters
- White House
Update: U.S. Senate will attempt to vote on fiscal cliff Monday night, but still work to be done - Sen. Kyl. So the deal is done, but there is "hope" it passes. Should be good for another 10 ES points.
Everyone's worst nightmare has come true: the endless Greek bailout has now shifted to D.C., where deals are leaked, rumored, preannounced, and priced in, long before they are discovered to never have been there in the first place. The winners, as in Europe: hedge funds, and caterers. Everyone else is a bystanding loser.
From Reuters:
Skeptical U.S. Senate Democrats requested a meeting on Monday with Vice President Joe Biden about the tentative deal on the "fiscal cliff" that he is forging with Senate Republican leader Mitch McConnell, a Democratic Senate aide said.With the deal apparently short of needed support, Democrats are hopeful that Biden will meet with them, but have not yet received a commitment, the aide said. Some Democrats complain that Biden went too far to find common ground with McConnell. Congress and the White House face a midnight deadline (0500 GMT Tuesday) to avert the fiscal cliff of tax hikes and spending cuts.
And now we look forward to tonight's Senate vote on the deal which "passed"... It passed right? The market said so.
23m from 7:14 pm
Senate D aide: Biden NOT on Hill; awaiting deal completion, no caucus meeting scheduled. GOP aide: "getting there on wrapping up D objections"
dynamic to watch: if no Hill action tonight, does deadline urgency fade, encourage Ds to abandon deal & start fresh from higher tax rates?
Senate Dem aide: votes "still possible" tonight, but Ds/Rs digging in on sequester. Ds will hear Biden sales job only if entire deal done.
Dem budget source: Ds "choking" on estate tax provision in Biden-McConnell deal, which preserves $5-M exemption, raises rate to 40% from 35%
dynamic to watch: if no Hill action tonight, does deadline urgency fade, encourage Ds to abandon deal & start fresh from higher tax rates?
John Harwood
Senate Dem aide: votes "still possible" tonight, but Ds/Rs digging in on sequester. Ds will hear Biden sales job only if entire deal done.
Dem budget source: Ds "choking" on estate tax provision in Biden-McConnell deal, which preserves $5-M exemption, raises rate to 40% from 35%
http://ransquawk.com/headlines/us-senate-majority-leader-reid-said-not-to-have-agreed-to-mcconnell-and-biden-deal-on-taxes-31-12-2012
US Senate majority leader Reid said not to have agreed to McConnell and Biden deal on taxes
- Democratic aide says Senator Reid has not signed off on proposal.
Update details:
- These comments conflict the most recent from US Senate minority leader McConnell who said "we're very, very close to an agreement"; agreement reached on all tax issues.
Reaction details:
- In reaction to these latest comments emini S&P falls 4.75 points lower in immediate reaction, from 1415.75 to 1411.00; trades 1413.00 last.
http://www.businessinsider.com/fiscal-cliff-live-2012-12
4:28 PM | DEM DRAMA: Fox News is reporting that Harry Reid hasn't signed off on the revenue deal
Fox News reporter Chad Pergram tweets:
http://www.zerohedge.com/news/2012-12-31/us-officially-go-over-fiscal-cliff
( Now to square the circle , we just need to see headlines that the " deal " has broken down and the talks have stalled again ! )
US To Officially Go Over The Fiscal Cliff
As we forecast back in November, it is now official that the House will not vote on any deal out of the Senate, assuming there is one which there won't be of course, later today, which means America will officially slide off the Fiscal Cliff. And now cue everyone being very hopeful and optimistic a deal will get done momentarily, if not sooner, in 2013. Of course, we all know just how far optimism takes America's dysfunctional Congress. The biggest irony in all of this is that the only winners today were the much hated "1%"-ers, whose taxes may or may not go up, who just got to book major year end profits on this last minute ramp. The remainder of America's population can quietly look forward to 2013 with "hope" and "optimism" that in 2013 Congress will finally stop being dysfunctional. Good luck. Oh, and before we forget, America just breached its debt ceiling: now the pillaging of various government retirement funds begins.
Finally, since the US is now officially over the cliff, does this mean that Ben Bernankecan finally get to work? Recall his words:
"if the economy actually went off the fiscal cliff, our assessment, the CBO’s assessment, outside forecasters, all think that that would have very significant adverse effects on the economy and on the unemployment rate. And so, on the margin, we would try to do what we could.We would perhaps increase a bit."
Is it time to increase QE just "a bit" then?
and....
http://ransquawk.com/headlines/white-house-demand-to-raise-taxes-to-avoid-spending-cuts-is-new-and-unexpected-request-according-to-a-gop-aide-31-12-2012
White House demand to raise taxes to avoid spending cuts is new and unexpected request according to a GOP aide
Says:
- No Republican support for proposal to raise taxes further to avoid spending cuts.
- No Republican support for proposal to raise taxes further to avoid spending cuts.
http://www.zerohedge.com/news/2012-12-31/obama-said-no-deal-mcconnell-denies-says-agreement-reached-all-tax-issues
Obama Said No Deal, McConnell Denies, Says "Agreement Reached On All Tax Issues"
Just when one thought the posturing couldn't hit more ridiculous levels, here comes GOP Senator Mitch McConnell refuting what the president said, refuting the supposed GOP revulsion to the president's prior statement, and stating that there is actually a deal.
- MCCONNELL SAYS AGREEMENT REACHED ON ALL TAX ISSUES
- MCCONNELL SAYS `WE'RE VERY, VERY CLOSE TO AN AGREEMENT'
- MCCONNELL SAYS HE REACHED OUT TO BIDEN TO SOLVE FISCAL CLIFF
- SEN. MCCONNELL SAYS `LET'S PASS THE TAX RELIEF PORTION NOW'
- So if agreement on tax issues, what is there disagreement on? And while everyone follows their talking points, and is taking the charade to unseen before heights, nobody has voted on anything yet, and nothing has actually passed Congress. But once again, the algos seem to like it, for now, and are taking the market on yet another stop run higher.
and......
http://www.weeklystandard.com/blogs/source-tax-terms-locked_692469.html
A senior Republican Senate aide passes along the tax terms of the deal being worked out by Democrats and Republicans on Capitol Hill and the White House to avert the "fiscal cliff." These terms are "locked," says the source, between Senate Republicans and the White House:
· Permanent extension of current rates on income below $400k (singles) and $450k (married).· Permanent 15% rate on cap gains and dividends for income below $400k (single), $450k (married).· Permanent 20% capital gains & dividends for those above $400k (single), $450k (married).· Permanent death tax at $5M exemption but a 40% Rate (as of tomorrow, exemption would be on estates valued at $1m at a 55% rate)· Permanent AMT patch· One year extension of 50% Bonus Depreciation
http://www.guardian.co.uk/world/2012/dec/31/fiscal-cliff-congress-deadline-live
Have Obama's remarks torpedoed a fiscal cliff deal?
The New York Times's Jonathan Weisman also thinks Obama's cloth-eared remarks about the slow pace in Congress and future spending plans may have been bad tactics:
http://www.guardian.co.uk/world/2012/dec/31/fiscal-cliff-congress-deadline-live
Obama: 'keep the pressure on' Congress
So other than talk about the closeness of a deal and mutter in general terms about future priorities – and hint ominously at future tax increases? – Obama doesn't have much to say about the state of flux the talks in Congress are currently in.
But there's still time to rib Congress:
And one thing we can count on with respect to this Congress is that if there is even one second left before you have to do what you're supposed to do, they will use that last second.
Obama concludes:
And so keep the pressure on over the next 12 hours or so. Let's see if we can get this thing done. And I thank you, all. And if I don't see you, if I don't show up at your house... [laughter] I want to wish everybody a happy New Year.
However, the closeness of a deal suggests he would have been better served keeping his mouth shut and waiting for a deal to actually emerge.
Jennifer Steinhauer of the New York Times thinks that Obama's remarks haven't helped.
http://thehill.com/blogs/floor-action/senate/275017-corker-says-obama-lost-votes-by-holding-his-pep-rally
GOP outraged by Obama comments
- 12/31/12 02:14 PM ET
Republicans expressed outrage over President Obama's public comments Monday on the "fiscal cliff," warning he had hurt prospects for a deal.
Sen. Bob Corker (R-Tenn.) said President Obama likely lost votes for the deficit-reduction deal because of the “pep rally” he chose to hold Monday.
“I just listened to the president and my heart is still pounding,” Corker said on the floor Monday minutes after Obama called on Congress to finish work on a deal to avoid the fiscal cliff.
“I was very disappointed to hear what the president had to say in front of a prep rally,"
he said. “I know the president has fun heckling Congress, but I think he probably lost a number of votes with this.”
he said. “I know the president has fun heckling Congress, but I think he probably lost a number of votes with this.”
Sen. John McCain (R-Ariz.) said he couldn't understand why Obama would mock Republicans in the midst of delicate talks.
"What did the President of the United States just do" McCain said. "He sent a message of confrontation to Republicans."
"I guess I have to wonder, and the American people have to wonder, whether the president really wants this resolved," McCain said.
Obama's comments also provoked howls from the GOP on Twitter, with several Republican operatives raising questions about why he would hit the GOP as Vice President Biden and Senate GOP Leader Mitch McConnell (Ky.) appear to be closing in on a deal to prevent looming tax hikes and spending cuts set to begin in January.
Obama in his comments said a deal was close but not done yet. He spoke in front of people the White House identified as "middle class taxpayers" who repeatedly applauded as Obama took shots at Congress for its inaction on the fiscal-cliff issues.
http://www.businessinsider.com/obamas-130-pm-announcement-on-the-fiscal-cliff-negotiations-2012-12
OBAMA SAYS DEAL IS NOT DONE, BUT IN SIGHT — TAKES SHOTS AT CONGRESS
Obama just got done talking on the fiscal cliff, and the gist is this:
A deal is in sight, but it's not done yet.
There's no agreement yet because of the sequester (the spending cuts). Obama is insisting on a balanced approach that doesn't go too fast.
During the speech he took swipes at Congress, about how they wait to the last minute, and can't agree to a grand bargain which is what he would have preferred.
He also made a point to say that the GOP is caving on tax hikes, which the GOP must hate.
The market fell while he spoke.
You can see some of our notes below, and you can follow our full live coverage here.
EARLIER: Obama's announcement on the Fiscal Cliff is set to begin.
There's a group of Middle Class Americans standing behind the podium.
Obama says that preventing the tax hike has been his "top priority."
Says it appears that a deal is getting done, but it's not done.
Not only would agreement prevent tax hikes, it would extend various tax credits.
Deal would extend unemployment insurance.
Preference was for a "grand bargain."
With this Congress, Obama says that that was too much to hope for.
The audience laughs at the swipe at Congress.
Sequester is a "piece of business that still has to be taken care of."
and.....
http://www.zerohedge.com/news/2012-12-31/obama-balanced-market-unbalanced
Obama 'Balanced'; Market 'Unbalanced'
He came; he spoke; he said 'balanced' a lot. The market decided it's not so 'balanced' and is responding thus...
S&P 500 futures ramped on the hope in the first few words and then slipped back as he went on and on in a 'balanced' way...
http://hotair.com/archives/2012/12/31/breaking-obama-to-speak-about-the-fiscal-cliff-at-130-et/
Breaking: Obama to speak about the fiscal cliff at 1:30 ET; Update: Tax deal done?
POSTED AT 1:11 PM ON DECEMBER 31, 2012 BY ALLAHPUNDIT
Just an FYI in case you’re one of the few Americans who’s still following this. Remember that O said on Friday that if Reid and McConnell couldn’t reach a deal by Monday, he’d ask Reid to bring the Obama plan — featuring tax hikes on all earners above $250,000 — up for a vote on the Senate floor. According to the AP, the “contours” of a deal are emerging as I write this. Good enough to buy more time for negotiations, or is O about to pull the plug and demand that up-or-down vote after all?
The contours of a deal to avert the ‘fiscal cliff’ emerged Monday, with Democrats and Republicans agreeing to raise tax rates on couples making over $450,000 a year, increase the estate tax rate and extend unemployment benefits for one year, officials familiar with the negotiations said…The deal in the works would return tax rates on families making over $450,000 to 39.6 percent, the same level as under former President Bill Clinton. The agreement would also raise tax on estates worth more than $5 million from 35 percent to 40 percent. Unemployment benefits would be extended for one year.
A “senior Republican side” tells Reuters that a majority of Senate Republicans are expected to vote yes on the deal. Republicans may not be the main stumbling block anymore, though. There’s a lot of angst among liberals this morning about Democrats backing off of the $250,000 threshold for new taxes, with people as prominent as Tom Harkin dumping all over the proposed deal. Joshua Green explains:
With the caveat that no reporter is privy to the details of the offers being swapped, here is the deal that seemed to be emerging: Democrats would get an extension of unemployment benefits for 2.1 million people; they’d patch the alternative minimum tax for a year to protect the middle class from sharp tax hikes; and they’d implement a “doc fix” to ensure that Medicare reimbursement rates to doctors don’t fall precipitously and limit patients’ access to medical care. Republicans would get to preserve Bush-era income tax rates for households making up to $400,000 (rather than the $250,000 limit Democrats prefer). They’d also get a lower tax rate and a much higher threshold for inheritance taxes (set to revert to 55 percent on estates of more than $1 million on Tuesday). And significantly, Republicans would hold onto their greatest point of leverage in upcoming negotiations over entitlement cuts, because the deal wouldn’t raise the debt limit.Here’s what’s important about everything Democrats would get: It’s temporary; everything expires (presumably) within a year. Here’s what’s important about what Republicans would get: it’s permanent. The tax rates won’t expire.That means Democrats are offering a huge gift to Republicans and getting almost nothing in return because on Jan. 1, if no deal is struck, Democrats will get even more revenue than they’re asking for without conceding a thing. And if, as polls suggest, voters would blame Republicans for going over the cliff, Democrats are also offering to save Republicans from their worst impulses—which, at least for the time being, since they haven’t yet agreed, is to reject this deal.A GOP source made the same point to Philip Klein, boasting that the emerging deal would trade “permanent Republican priorities in exchange for temporary Democratic priorities.” I’m mystified as to why Democrats would budge that far on the income threshold for new taxes when they can wait another 11 hours and then pound the table for tax hikes on the $250K and up crowd, as O demanded all along. If you’re not even getting the GOP to agree to raise the debt ceiling in return, why would you do such a thing? Lefty Jonathan Chait doesn’t understand it either and thinks all it’ll do is convince the GOP that they can make Obama blink on the debt ceiling if they hold out on that in a few months too.Hence the mystery of O’s 1:30 appearance. Is he going to go out there and say he’s “encouraged by the progress” or whatever and hopeful that a deal can be reached in the next few hours, or is he going to side with progressives and call this a crap deal that he can’t support and demand that Reid bring O’s own bill up for a vote? (The latter would be odd given that his own VP is now evidently the lead Democratic negotiator.) I think he’ll do both: He’ll set a deadline of, say, 5 p.m. today for a negotiated deal and then ask for a vote on his plan if nothing’s been hammered out by then. Presumably the GOP will filibuster it — why vote yes if there’s a better deal for Republicans being negotiated between Biden and McConnell? — and then O can whine about it for a day or two until something finally passes both houses.Stand by for updates.Update: Liberals care trying to figure out the Democrats’ strategy in moving off of the $250K threshold.Ezra Klein says they’re giving a little now in the expectation of getting a lot later — namely, they’re planning to ask for further tax hikes in exchange for entitlement cuts as part of the inevitable debt-ceiling deal in the spring. Greg Sargent is more pessimistic and thinks they’re caving because they’ve realized they don’t have quite as much leverage as they thought:A White House ally spells out an alternative interpretation. Dems don’t necessarily believe going over the cliff will give them all that much more leverage in the talks next year. It’s been widely argued (by me and many others) that if we do go over the cliff, Dems can simply move to pass the Obama Tax Cuts For The Middle Class, forcing House Republicans to go along. But some Dems question whether House Republicans will feel the need to follow this script. Rather, the thinking goes, if Dems do that next year, the House GOP leadership can pass its own bill cutting taxes on all income up to, say, $500,000 or $600,000.If the idea is that it’s easier for Republicans to support continuing tax cuts just on some income levels after they’ve all expired, such a bill (with $500,000 or $600,000 as the threshold) could pass the House. What’s more, some Congressional Democrats may feel like they have to support such a bill, too. And the worry is that if this is then kicked over to the Senate, then some Senate Dems may feel tempted to support it or at least negotiate around it, which could divide Senate Dems. After all, some of them have already voiced support for putting the income threshold at $500,000 or $1 million.And so, the idea is that it’s better to lock in a deal on rates now, at, say, $450,000, extend unemployment benefits, and pocket those gains and continue the fight next year.Obama can’t hold his own caucus together on one of his signature policy demands, flush from a landslide presidential election win? What?Update: Sounds like the key sticking point is unstuck:Update: Equally baffling, why doesn’t the GOP, the self-styled party of “the family,” push for this?Update: Marco Rubio said yesterday that he thinks most Senate Republicans are disinclined to filibuster whatever ends up coming to the floor, but I assume that’s limited to whatever bill emerges from negotiations. They’ll surely filibuster Obama’s bill if Reid brings it up. Why wouldn’t they at this point, when they know how far Dems will bend on the income threshold?
Update: Via Mediaite, Bob Corker reminds us just how embarrassingly low the stakes are here from the standpoint of deficit reduction. Quote: “This is a lot of fuss about nothing today, unless you make, you know, somewhere between $350,000 a year and $550,000, today’s discussion is totally irrelevant, because that’s all that’s being discussed.”
Update: Expect the obligatory amount of preening at this presser but not much news:
Update: Like Corker said, totally irrelevant:
Update: Senate GOP aides tell NRO that the two sides have agreed on the tax numbers. Details: $400K for individuals, $450K for married couples, and a 40 percent tax on estates above $5 million. Can it pass the House, though? Quote:
http://thehill.com/homenews/senate/274941-lawmakers-have-no-bill-no-deal-and-new-years-on-the-cliff
Lawmakers have no bill, no deal and New Year's Eve on the cliff
- 12/31/12 05:00 AM ET
Senate leaders are racing against the clock to reach a "fiscal cliff" deal the House and Senate can approve on New Year's Eve.
Leaders in the upper chamber narrowed their differences Sunday as Republicans agreed to drop a demand to curb cost-of-living increases to entitlement benefits, while Democrats showed flexibility on taxes.
Yet after months of talks on ways to avoid the fiscal cliff of tax hikes and spending cuts at the end of 2012, House and Senate lawmakers find themselves approaching the new year without a bill to present to their members.
Significant differences remain over two key parts of a deal — the automatic spending cuts known as the sequester and the estate tax.
Instead of working through the night, the Senate recessed at 7:27 p.m. Sunday with plans to reconvene Monday at 11:00 a.m., and the House recessed around the same time.
Senate Majority Leader Harry Reid (D-Nev.) told senators to expect an update on Monday morning.
The House is waiting on the Senate to act and on Sunday positioned itself to vote immediately on any legislation that might pass the upper chamber. The House Rules Committee approved a rule that would allow the chamber to waive its usual three-day rule and immediately consider a Senate deal.
Reid told colleagues there is still time to reach a compromise to avoid across-the-board tax increases, and he instructed colleagues not to make New Year’s Eve plans.
“There is still significant distance between the two sides, but negotiations continue,” Reid said on the Senate floor. “There is still time left to reach an agreement, and we intend to continue negotiations.”
Reid has proposed raising the threshold for extending current tax rates on individual income to $360,000 and on family income to $450,000, according to Democratic senators who received a briefing from him. Republicans have countered with a proposal to raise the threshold for individuals to $450,000 and families to $550,000.
But the estate tax and the sequester, an automatic $109 billion cut to domestic and defense spending next year, remain outstanding issues.
Republicans want to extend the estate tax at its current 35 percent rate and exempt inheritances below $5 million.
Both sides want to halt the sequester but cannot agree how to offset its cost.
Democrats say the revenues collected from raising taxes on the wealthy should pay for the sequester, while many Republicans say that is a nonstarter.
“You cannot in my opinion turn the sequester off without paying for it,” said Sen. Bob Corker (R-Tenn.). “You can’t pay for it with revenues; those are cuts.”
But Republicans are not unified.
Sen. John McCain (Ariz.), the ranking Republican on the Armed Services Committee, said the first priority should be to postpone them. He vowed to vote against any deal that does not.
“That’s one of the biggest problems because obviously some of us cannot vote for anything that doesn’t address sequester because of national security,” he said. “The sequester in my view has got to be at least delayed.”
Senate Democratic Whip Dick Durbin (Ill.) said his side is still fighting to extend unemployment benefits.
Reid and Senate GOP Leader Mitch McConnell (Ky.) have made progress on other fronts. Democrats acknowledge they will not be able to include stimulus funding for transportation and infrastructure projects. Republicans say Democrats have dropped their demand to raise the debt ceiling.
Senate leaders may get a fresh shot of urgency when the financial markets open Monday morning. The Dow Jones Industrial Average lost nearly 160 points on Friday as prospects for a deal dimmed, and it could plunge again.
If the Senate approved a deal on Monday evening or Tuesday morning, it would give the House a chance to vote on New Year's Day before the markets open again on Wednesday. But swift approval in the upper chamber would depend on getting unanimous consent to waive procedural rules, by no means a sure prospect.
The leaders started the weekend on an optimistic note and gave themselves 36 hours to craft a deal that could be presented to their respective caucuses on Sunday afternoon.
But the talks hit a ditch on Saturday night when McConnell made a proposal that included switching the formula used to calculate Social Security benefit payments. Using the chained consumer price index, or "chained CPI," would curb the growth of the program's cost-of-living adjustments.
Democrats slammed it as a poison pill and warned there would be no last-minute deal to avoid tax hikes if Republicans insisted on entitlement reform, which Democrats had assumed was off the table at this late stage.
McConnell quickly dropped his demand for Social Security reform and reached out to Vice President Biden in hope that he could help “jump-start” the negotiations.
At one point during a meeting with Senate Republicans, McConnell left the room to discuss the next steps with Biden.
“What’s frustrating about this is that this is more about histrionics and theater than it is about good-faith negotiations,” Sen. John Cornyn (R-Texas) said. “I’m somewhat slightly encouraged that Sen. McConnell is talking to the vice president.”
Cornyn said McConnell and Biden talked about “something specific” and the Republican leader would evaluate the president’s latest position and recommend a course of action to the Senate Republican conference.
Reid said the Republican concession on Social Security would allow the talks to move forward.
There is mounting evidence that Republicans will give more ground on income tax rates.
Sen. Olympia Snowe (R-Maine), who earlier this year voted against Obama's favored tax plan, said she could support Obama's proposal to extend tax rates only on annual income below $250,000 if it were the only way to prevent middle-class tax rates from rising. Democrats also signaled willingness to compromise on the threshold for extending rates.
“I like the Reid proposal,” said Sen. Barbara Mikulski (Md.), a liberal Democrat. She said it would have to include other provisions such as one fixing the Alternative Minimum Tax, which was originally designed to ensure the wealthy pay a minimum percentage in taxes but was not indexed for inflation.
and.....
Pentagon To "Temporarily" Fire 800,000 If No Cliff Deal; Chaos To Ensue
Just in case the stakes in the final episode of the 2012 season of the "Fiscal Cliff" soap opera, and a 30 second advertising block was not selling for a record amount, here comes the Pentagon with a warning that it may fire almost 1 million civillians their services will be required but unpaid if there is no Cliff deal. From the WSJ: "Mandatory federal spending cuts designed to be prohibitively drastic will become a reality on Wednesday if negotiators remain unable to reach an agreement to avert the reductions.Illustrating the gravity of the cuts, the Pentagon plans to notify 800,000 civilian employees that they could be forced to take several weeks of unpaid leave in 2013 if a deal isn't struck, and other agencies are likely to follow suit. The cuts, which members of both parties have referred to as a "meat ax," are the product of a hastily designed 2011 law that required $110 billion in annual spending reductions over nine years to reduce the deficit. Their severity, representing close to 10% of annually appropriated spending, was intended to force Democrats and Republicans to come together on a broader package of deficit-reduction measures, which would replace the cuts. That effort failed, raising the prospect of the cuts' taking place."
It gets worse now that it turns out absolutely nobody is prepared for precisely the contingency America is now facing:
Complicating matters, the White House hasn't informed federal agencies or contractors of precisely how the cuts might be administered, leading to confusion about the potential impact. Several federal agencies referred questions about the cuts to the White House's Office of Management and Budget. OMB didn't respond to questions."The biggest challenge is just the uncertainty," said Steven Glass, chief financial officer at the Cleveland Clinic, a medical center and health-care system that expects to see a $22 million cutback in its Medicare payments in 2013 if the government doesn't reverse the cuts. "It's really hard to plan when you're literally looking a few days out and you don't know what Washington is going to do."
Oh well, luckily according to the latest bout of optimism spewing forth from Politico, things are fine and a deal, at least in the Senate, is imminent.
Senate Minority Leader Mitch McConnell (R-Ky.) and Vice President Joe Biden engaged in furious overnight negotiations to avert the fiscal cliff and made major progress toward a year-end tax deal, giving sudden hope to high-stakes talks that had been on the brink of collapse, according to sources familiar with the discussion.McConnell and Biden, who served in the Senate together for 23 years, only started talking Sunday, after negotiations between Senate Majority Leader Harry Reid (D-Nev.) and McConnell sputtered.Sources close to the talks said a deal is now more likely to come together but cautioned that obstacles remain, including how Speaker John Boehner and House Republican leaders react to any tentative agreement.
“The Leader and the VP continued their discussion late into the evening and will continue to work toward a solution. More info as it becomes available,” a McConnell spokesman said.
Then again, this wouldn't be the first time Politico has gotten absolutely everything wrong about the near and far-term outcome of the cliff. So sit back, grab the popcorn, and watch as algos proceed to respond with furious stupidity to every single unsourced, unvalidated, and untrue rumor and various other flashing red headlines.
As for those millions of people who, like the guy in the basement in Office Space, and like the New Normal Schrodinger cat, are employed and unemployed at the same time but certainly unpaid, better luck next time.
http://www.zerohedge.com/news/2012-12-31/cliffbiter
Cliffbiter
- Asset-Backed Securities
- Bond
- Debt Ceiling
- High Yield
- Intrade
- Markit
- Precious Metals
- Recession
- Sovereign Debt
It's the last trading day of the year, nothing has been resolved on the Cliff, the perpetually wrong media has now decided to change its tune and is spin the Wile E. Coyote plunge as a "good thing" (just as we expected), Congress is nowhere, the Senate failed to reach any resolution last night and is resuming the "negotiations" farce at the bright and early hour of 11 am, and yet somehow, in spite of everything, the strong bid under the futures refuses to go away (thank you Kevin Henry). This despite what is becoming clear to even this broken market (InTrade odds of a debt ceiling deal by the end of today are still a substantial 2.3%) that there will likely be no deal until some time in February or March when the debt ceiling extensions expire by which point the only question is how deep the US recession will be. And still everyone will be shocked, shocked, when nothing is done today either. Why?Because the market continues to price in an outcome which demands that it crash for it to be achieved. That so few grasp this is frankly, disturbing. Also, everything else is perfectly enjoyable theatrical noise. And just to keep the excitement factor really high, most rates and FX markets close early today, with rates and FX futures markets close at 1pm New York time while cash bond trading at 2pm.
Not like news matters anymore, but here is what else happened recently, via BBG:
- Greek October retail sales imploded by 18.1% by volume and 17.1% by revenue, the biggest dump in 2 years and proof that despite Greek hedge fund bondholders being made whole, the Greek nation and economy has never been worse.
- Merkel said the economic environment will be more difficult in 2013 than this year, and that Europe’s sovereign debt crisis is "far from over," though progress has been made
- A French court’s rejection of Hollande’s 75% millionaire tax shows the limits on his ability to tap high earners, even as the ruling is unlikely to attract investors and executives back to France
- BofAML Corporate Master Index OAS narrows to 153bps. $54.9b has priced in December. Markit IG widens 1bps to 98bps; YTD low 83bps. High Yield Master II OAS rises 2bps to 530bps; $25.26b has priced this month. Markit HY narrows 5bps to 510bps, YTD low 445bps
- $6.6b ABS priced in December
- EUR/USD falls, trades at $1.3187. Asian, European stocks mixed; U.S. equity-index futures higher. Energy complex lower, precious metals gain.
Oh, and finally today the US finally breached its latest and greatest debt ceiling as reported previously. But just one more hike, and this time the US will get its financial house in order. Promise.
and......http://www.guardian.co.uk/world/2012/dec/30/fiscal-cliff-deal-peril-senate
Fiscal cliff deal in peril as Senate negotiations enter standstill
Obama says earlier that he intends to strong-arm Congress into scaled-back measures if no deal can be reached
President Barack Obama pauses during a statement on the fiscal cliff negotiations at the White House on Friday. Photograph: Evan Vucci/APAmerica is entering its final day to avert the fiscal cliff, after talks between Senate leaders in Washington broke up with no deal in sight.
Harry Reid, the Democratic Senate majority leader, and Mitch McConnell, who heads the chamber's Republican minority, ended more than a day of on-off talks on Capitol Hill on Sunday without an agreement and with nothing for lawmakers to vote on. It brings closer the prospect that America could plunge off the so-called fiscal cliff at midnight on Monday, triggering swingeing spending cuts and across-the-board tax increases.
Talks are expected to resume but with the clock ticking inexorably towards the new year deadline, few in Washington were optimistic about a deal.
McConnell said no single issue remained an "impossible sticking point" and blamed Democrats for not responding to a Republican offer made on Saturday evening.
He called vice-president Joe Biden, with whom he has worked before, to try to "jump start" negotiations. "I'm still willing to get this done but I need a dance partner."
Reid said the Republicans had a made a good-faith proposal but that the two sides remained apart on some "pretty big issues" and the Democrats could not respond.
"We've been negotiating now for 36 hours or thereabouts. We've been trying … but at this stage we're not able to make a counter-offer."
Republican senators withdrew a demand over a new way of calculating inflation that would have cut social security and other social programmes, but the concession failed to bridge the gap between the two sides.
The deadlock cast gloom over the US just hours after Barack Obamatried to inject hope with a final pitch to Congress to act on the fiscal cliff.In a rare foray on to the weekly round of political talk shows, the president sought to put the blame for the looming economic crisis firmly at the door of the Republican party, accusing his opponents of having "trouble saying yes" to any proposal put before them."They say that their biggest priority is making sure that we deal with the deficit in a serious way, but the way they're behaving is that their only priority is making sure that tax breaks for the wealthiest Americans are protected. That seems to be their only overriding, unifying theme," Obama said.The pointed remarks came as lawmakers in Washington prepared for a rare Sunday session, which convened only to break up hours later with no vote.Congress has until midnight on Monday to find a solution to the current fiasco. That deadline will automatically trigger a series of fiscal measures that experts have said could plunge the US back into a recessionIf no deal is done, 88% of Americans will see their taxes rise on 1 January, a wave of deep spending cuts will start to take effect, and 2 million long-term unemployed people will lose their benefits.The task of reaching a compromise had fallen on Reid and McConnell. Both men were summoned to the White House on Friday, alongside House speaker John Boehner and minority leader Nancy Pelosi. Treasury secretary Timothy Geithner was also in attendance.
After that meeting, Obama said he remained "modestly optimistic" that a deal could be achieved.But since then there has been no firm indication that a grand compromise was indeed obtainable."I was modestly optimistic yesterday, but we don't yet see an agreement. And now the pressure's on Congress to produce," Obama told NBC's Meet the Press on Sunday, ahead of news that the talks had indeed broken down.Boehner responded saying Americans elected the president to lead, not cast blame. "The president's comments today are ironic, as a recurring theme of our negotiations was his unwillingness to agree to anything that would require him to stand up to his own party," Boehner said. "We've been reasonable and responsible. The president is the one who has never been able to get to 'yes'."Reid and McConnell had been tasked with coming up with a solution by 3pm Sunday. But little more than an hour until that deadline, both men took to the Senate floor to announce that both side's position remained far apart.The main sticking point has been the threshold for raising income taxes on households with upper-level earnings.Obama wants all earners of $250,000 a year and above to shoulder a greater tax burden. Analysts believe that any deal could be anchored on raising taxes for households earning more than $400,000 or $500,000 a year.
But many Republicans in the House have indicated that they will vote against any increase in tax.Not only could this scupper the chances of a grand deal, it could also see the blocking of the White House's back-up plan to avert the fiscal cliff.Obama has indicated that if Reid and McConnell fail to produce an agreement by the end of Sunday, he will strong-arm Congress into a vote on scaled-back measures that would avert the immediate cost of America heading over the fiscal cliff.That simple "up-or-down vote on a basic package" would stop tax hikes for middle-income Americans, while "laying the groundwork for future progress on more economic growth and deficit reduction", Obama said on Saturday.But even that may have difficulty passing through the House, given the entrenched position of some Tea Party-backed Republicans.Obama appeared to prepare for that eventuality on Sunday."If all else fails, if Republicans do in fact decide to block it, so that taxes on middle-class families do in fact go up on 1 January, then we'll come back with a new Congress on 4 January and the first bill that will be introduced on the floor will be to cut taxes on middle-class families," he said.But he warned that missing the deadline would still result in "adverse reaction in the markets" and would "hurt our economy badly".
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