http://www.zerohedge.com/news/2012-12-30/market-opens-near-fridays-lows-senate-gives-early-night

Market Opens Near Friday's Lows As Senate Gives Up (Early) For The Night

Submitted by Tyler Durden on 12/30/2012 18:05 -0500

UPDATE: ES scrambled up to Flash-Crash lows at 1391.5

No Deal; No Deal. The updates came thick and fast and almost entirely full of nothing until Harry Reid called a halt to proceedings:

*REID SAYS SENATE WILL RESUME WORK AT 11 A.M. TOMORROW
*REID SAYS `THERE'S STILL TIME LEFT' TO REACH BUDGET AGREEMENT

S&P 500 Futures Open at Friday's lows amid higher than average volume but is modestly off the lows as an initial push (ES +4). EURUSD is 8 pips higher (in a purely algo-oriented lift as it was completely oblivious into Friday's close).

ES bounced a little

EURUSD vs ES

ES up to Flash Crash lows... interesting from here...

http://www.zerohedge.com/news/2012-12-30/reid-unable-come-counteroffer-apart-some-pretty-big-issues-hands-over-negotiations-b

Reid "Unable To Come Up With Counteroffer... Apart On Some Pretty Big Issues", Hands Over Negotiations To Biden

Submitted by Tyler Durden on 12/30/2012 14:20 -0500

The second update of the day is here, and this one is far less jovial and optimistic than that coming from the seemingly quite cluless Lindsey Graham:

REID SAYS HAVE BEEN UNABLE TO COME UP WITH COUNTEROFFER
REID SAYS `WE'RE APART ON SOME PRETTY BIG ISSUES'
REID SAYS `I WISH THEM WELL' REGARDING MCCONNELL-BIDEN TALKS
MCCONNELL SAYS HE CALLED BIDEN TO TRY TO `JUMP START' TALKS

Nothing like the fate of the nation in the hands of Joe Biden, who may or may not still be laughing.

More from Bloomberg:

President Barack Obama made a last- minute appeal for compromise as three senators said the chances were greater than 50-50 for a deal to avert more than $600 billion in tax increases and spending cuts scheduled to take effect Jan. 1.

In an interview broadcast today on NBC’s “Meet the Press,” Obama warned of “an adverse reaction in the markets” if Congress doesn’t act.

Republicans “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,” Obama said, adding that his offers to Republicans have been “so fair that a lot of Democrats get mad at me.”

In a statement, House Speaker John Boehner, an Ohio Republican, called Obama’s comments “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.”

The president’s interview with NBC was taped yesterday at the White House. At the other end of Pennsylvania Avenue, Senate negotiators from both parties were seeking compromise legislation to prevent at least some of the tax increases and spending cuts from taking effect.

‘Exceedingly Good’

Appearing on “Fox News Sunday,” Senator Lindsey Graham, a South Carolina Republican, said the prospects for a deal before Jan. 1 are “exceedingly good.” They will include tax increases on upper-income Americans, he said, and represent a “political victory to the president.”

“Hats off to the president, he won,” Graham said. “He stood his ground. He’s going to get tax rate increases -- maybe not $250,000, but upper-income Americans.”

Graham said the “sad news for the country” is that any deal now won’t address debt and will guarantee a fresh fight over deficit reduction when the debt ceiling debate resurfaces early next year. He called on Republicans to have the “courage of our convictions.”

Senators Charles Schumer, a New York Democrat, and Jon Kyl of Arizona, the Senate’s No. 2 Republican, assessed the odds of a deal before Jan. 1 at better than 50-50. “I think a little higher than that,” Schumer said on ABC’s “This Week,” while Kyl said, “I don’t disagree with Chuck.”

At the same time, Schumer said there are “no breakthroughs yet” by bipartisan negotiators in the Senate. Kyl said there is a “significant effort” by “responsible people on both sides of the aisle” because “if we are not able to reach an agreement, it will be dire.”

‘A Chasm’

Not all senators were as optimistic. Appearing on CBS’s “Face the Nation,” Dick Durbin of Illinois, the Senate’s No. 2 Democrat, said, “There’s still a chasm here,” though he declined to say that a deal is impossible. Senator Tom Coburn, on the same program, said the two sides are “far apart.”

Obama said on NBC that “if all else fails,” when a new Congress convenes on Jan. 3 “the first bill that will be introduced on the floor will be to cut taxes on middle-class families.”

Asked about the immediate economic impact of going over the fiscal cliff -- a term used by Federal Reserve Chairman Ben S. Bernanke in February -- the president said, “It’s hard to speculate on the markets, but obviously I think business and investors are going to feel more negative about the economy next year.”

and.....

http://www.foxnews.com/politics/2012/12/30/senators-work-behind-scenes-saturday-on-fiscal-deal-votes-would-come-sunday/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+foxnews%2Fpolitics+%28Internal+-+Politics+-+Text%29

A House Democrat and a House Republican said Saturday they do not expect a vote until after the weekend on any proposal to avert the looming fiscal crisis.

Reps. Steve Stivers, R-Ohio, and John Yarmuth, D-Ky., both told Fox News they expected the Senate to work on a proposal through Sunday and perhaps into Monday morning before voting, then pass the legislation to the House for a final vote.

“I’m looking for something on Monday,” Yarmuth said. “The Senate is going to have to act first. … They’ll need that time through Sunday and early Monday.”

Said Stivers: “I think we’ll see it Monday. I don’t think we’ll see it Sunday.”

What the Senate will offer remains unclear, though the most likely plan is extending tax cuts and deferring a deal on spending cuts until next year.

Senate leaders worked off-stage Saturday to reach a final-hours deal to avert a fiscal crisis, though neither chamber was officially in session. A Senate aide with knowledge of the talks told Fox News that there was "no major progress."

Senate Majority Leader Harry Reid, D-Nevada, adjourned the chamber until Sunday so Democratic and Republican leaders can negotiate on a deal to present to the House.

The Nevada Democrat was not seen on Capitol Hill on Saturday and staffers said he did not plan to work from his Senate office. However, Minority Leader Mitch McConnell was on the Hill.

"We've been trading paper all day and talks continue into the evening," McConnell said as he left the Capitol.

House members will officially return Sunday should the Senate present them with a plan to stop the tax increases and perhaps the deep spending cuts that are scheduled to kick in next week.

They also will work on several remaining bills in the lame duck session. However, neither the farm bill nor the emergency spending bill for Hurricane Sandy is on the docket.

Senate leaders from both sides of the aisle vowed late Friday to scramble over the weekend to produce a new bill, on the heels of a high-stakes White House meeting with President Obama that is seen as the last chance to come together before the tax-hike deadline.

Several senior administration officials told Fox News late Friday night that McConnell, R-Ky., is showing strong signs that he will help seal a deal.

However, they acknowledges he will have a difficult time getting a deal passed in the Republican-controlled House, which has so far rejected any plan that includes allowing tax rates to increase for higher-earning Americans.

Reid called the White House meeting Friday "very constructive."

"We need to have everybody step back a bit," he said.

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.

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.

The latter idea, though, could 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.

"We are obviously running out of time here," McConnell said earlier Friday.

Lawmakers effectively have fewer than two working days to pass legislation. While the Senate was in session this week, 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 being offered by Obama or the new plan being drafted in the Senate, 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.

http://www.businessinsider.com/david-gregorys-interview-with-obama-2012-12

( As of the Meet the Press Interview of President Obama , no deal has been agreed - seems like things stand the same as Saturday - which was the same as Friday.... )

OBAMA: 'I Was Modestly Optimistic Yesterday, But We Don't See An Agreement'

Sam Ro | 35 minutes ago | 273 |

NBC's David Gregory has an exclusive interview with President Barack Obama, which will air today at 10:30 AM ET.

Gregory has been tweeting quotes. Here's what he's given us so far:

http://www.zerohedge.com/news/2012-12-30/cliff-rumors-start-early-lindsey-graham-says-obama-has-won

Cliff Rumors Start Early As Lindsey Graham Says "Obama Has Won"

Submitted by Tyler Durden on 12/30/2012 09:40 -0500

As largely expected, Sunday would be a day marked by rumors, anti-rumors, denials, counter-denials, and much more groundless speculation if zero facts, however without an open market reacting to every single headline like a collocated stung dog. Sure enough, in the first such rumor of the day, we just had Republican Senator - a long time opponent of the Norquist tax pledge - Lindsey Graham, pushing for his agenda in the same way that the Greek finance ministry would unleash perfectly wrong rumors to the FT and Reuters, who said on Sunday that chances for a small "fiscal Cliff" deal in the next 48 hours were "exceedingly good" and that President Barack Obama had won: i.e., taking an opinion and making it fact - something seen so often in the European negotiating tactics. "I think people don't want to go over the cliff if we can avoid it," Graham said on Fox News Sunday. Of course, how Graham views the world, and how potentially filibustering Senators do, not to mention the majority of Congress do, is a totally separate matter.

"This deal won't affect the debt situation, it will be a political victory for the president and I hope we'll have the courage of our convictions when it comes time to raise the debt ceiling to fight for what we believe as Republicans, but hats off to the president, he won," Graham said.

And hats off to Graham for speaking for himself if not anyone else. As to whether the president has won, tune in much later today after the emergency Congressional meeting takes place late Sunday, and especially after tomorrow's follow up GOP meetings. Something tells us Graham will be, five days ahead of Boehner's reelection vote, dead wrong.

http://thehill.com/homenews/administration/274877-obama-pressure-is-on-congress-to-reach-fiscal-deal-before-deadline

Obama: ‘Pressure is on Congress' to reach tax deal before deadline

By Amie Parnes - 12/30/12 09:11 AM ET

President Obama said Sunday that the "pressure is on Congress" to reach a compromise and resolve the so-called “fiscal cliff” so that taxes do not go up on the middle class, faulting GOP negotiators for the unresolved talks.

In an exclusive interview with NBC's “Meet the Press” on Sunday, Obama once again called on Congress to reach an accord to avoid January’s slated tax rate increases and automatic spending cuts. Obama asked lawmakers to approve his plan to extend current rates for most income earners, but increase taxes for the wealthiest income brackets.

"If we're serious about deficit reduction we should make sure that the wealthier are paying a little bit more and combine that with spending cuts to reduce our deficit and put our economy on a long-term trajectory of growth," Obama said, sitting in the White House's Blue Room in the interview which was taped on Saturday.

Obama put the blame on Republicans for the prolonged negotiations, saying they've "had trouble saying yes to a number of repeated offers."

At the very least, if they are unable to produce a comprehensive package on deficit reductions, Obama said he has asked lawmakers to at least focus on a scaled-back plan to "make sure that people's taxes don't go up" and that Congress extend unemployment benefits for millions of Americans.

Obama said while he was "modestly optimistic" after meeting with lawmakers on Friday, "we don't yet see an agreement. And now the pressure's on Congress to produce.

“If they don't, what I've said is that in the Senate we should go ahead and introduce legislation that would make sure middle class taxes stay where they are and there should be an up or down vote. Everybody should have a right to vote on that. If Republicans don't like it, they can vote no. But I actually think that there's a majority support for making sure that middle class families are held harmless."

Obama’s comments come as Senate leaders huddled on Saturday in a last-ditch effort to craft a deal. Senate Majority Leader Harry Reid (D-Nev.) has scheduled a Democratic caucus meeting on Sunday to update his colleagues on the talks. Minority Leader Mitch McConnell (R-Ky.) has said he will do the same.

If a deal is not struck, Senate Democrats are likely to introduce a bill extending the Bush-era rates for income earners below $250,000, but it is uncertain if House Republicans would pass that measure.

Asked by moderator David Gregory how going over the cliff would impact the financial markets, Obama said businesses and investors "are going to feel more negative about the economy" in 2013.

Obama blamed the "dysfunction" in Washington for drawing out the ongoing fiscal crisis.

"If people start seeing that on January 1st this problem still hasn't been solved, that we haven't seen the kind of deficit reduction that we could have had had the Republicans been willing to take the deal that I gave them, if they say that people's taxes have gone up, which means consumer spending is going to be depressed, then obviously that's going to have an adverse reaction in the markets," he said.

Asked by Gregory about whether automatic spending cuts have to be part of the deal struck by lawmakers, Obama said if revenue is raised by the wealthiest paying "a little bit more, that would be sufficient to turn off" the automatic spending cuts. Obama said that would result in a "better outcome" for the economy in the long term.

But in the interview, time and again, Obama put the blame on Republicans for the inaction on the fiscal crisis.

"So far, at least, Congress has not been able to get this stuff done," Obama said. "Not because Democrats in Congress don't want to go ahead and cooperate, but because I think it's been very hard for Speaker Boehner [R-Ohio] and Republican Leader McConnell to accept the fact that taxes on the wealthiest Americans should go up a little bit, as part of an overall deficit reduction package."

Obama would not accept some of the responsibility for the stalemate, saying he has a track record of cutting spending by over a trillion dollars in 2011.

"I campaigned on the promise of being willing to reduce the deficit in a serious way, in a balanced approach of spending cuts and tax increases on the wealthy while keeping middle class taxes low," he said. "I put forward a very specific proposal to do that. I negotiated with Speaker Boehner in good faith and moved more than halfway in order to achieve a grand bargain. I offered over a trillion dollars in additional spending cuts so that we would have $2 of spending cuts for every $1 of increased revenue.

“I think anybody objectively who's looked at this would say that we have put forward not only a sensible deal but one that has the support of the majority of the American people, including close to half of Republicans," said Obama.

and.....

http://dailycaller.com/2012/12/29/david-brooks-last-minute-fiscal-cliff-negotiations-just-everyone-trying-to-look-busy-video/

David Brooks: Last-minute fiscal cliff negotiations just everyone ‘trying to look busy’ [VIDEO]

http://www.businessinsider.com/jim-oneill-fiscal-cliff-2012-12

JIM O'NEILL: The Markets Will Be Okay Without An Immediate Fiscal Cliff Deal

Sam Ro | Dec. 30, 2012, 6:27 AM | 564 | 3

Business Insider

The fiscal cliff is right around the corner, and we still have no deal.

But it may be an exaggeration to say that the economy is doomed if we "go over" the cliff without a deal.

Jim O'Neill, Chairman of Goldman Sachs Asset Management, thinks markets only need the impression that a deal will get done sometime soon, even if it is after December 31.

O'Neill spoke with the U.K.'s Daily Mail:

So far markets have taken this all reasonably well, assuming there’s a chance of some last-minute deal. Even if they can’t put together something on Sunday, if they can create the impression they can put together a deal in the next couple of weeks then the markets will be OK.

‘Even if all they can come up with is something cobbled together, well, maybe that would be no bad thing.

Sure, it's ridiculous that a deal hasn't been done yet. But, perhaps the fiscal cliff fear mongers should tone it down a bit.

http://www.thedailybeast.com/cheats/2012/12/30/fiscal-cliff-deadline-sunday-3-p-m.html

Fiscal Cliff Deadline: Sunday 3 P.M.

The Capitol’s halls may be dark and silent, but don’t be fooled—it’s getting down to the wire. With only two days left before the nation barrels off the fiscal cliff, Senate leaders negotiated into the night over a new plan on taxing the rich, among other things. While the House and Senate are closed until Sunday afternoon, Harry Reid and Mitch McConnell were working hard—aides carried papers between the two leaders’ offices, only 60 steps apart. While the deadline is Jan. 1, Reid and McConnell have set Sunday at 3 p.m. as when the “clock ends.” That way, legislation will be set by Sunday night, and a vote will be held Monday afternoon. But you know how that goes.

Read it at The Washington Post

December 30, 2012 7:38 AM

http://www.zerohedge.com/news/2012-12-29/obama-issues-executive-order-granting-pay-increase-members-congress-federal-workers

( Just wondering why such an Executive Order would be seen as a good idea while we have Fiscal Cliff and soon to follow debt ceiling battles unresolved ..... )

Obama Issues Executive Order Granting Pay Increase For Members Of Congress, Federal Workers

Submitted by Tyler Durden on 12/29/2012 15:19 -0500

Congressional Budget Office

President Obama

When it comes to US austerity, a very sensitive topic as framed best by the "spending cuts" portion in the Fiscal Cliff debate, the ideas range from the surreal to the outright idiotic: as an example in the most recent Obama proposal spending would be "reduced" in the form of $290 billion in interest savings - not an actual spending reduction, but a hope and a prayer that because rates are lower, the government will "save" money with rates continuing to be lower (something which immediately causes a #Ref! explosion for anyone not using government math), $130 billion in savings that would come from once again rejiggering the definition of 'inflation', as well as "savings" from not funding extra defense spending because the US is not engaged in a pro forma war. Like we said: surreal and idiotic, or in other words, no actual real cuts to spending. Yet even as the nation is gripped by the melodrama of fake spending cuts offset by the threat to tax millionaires more (all of whom will merely find more creative and effective ways to hide their wealth and income offshore), spending increases are all too real, such as last night's order by Obama's just issued an executive order to end the pay freeze for federal employees, which is the equivalent of a wage increase. A truly deserved rise in wages for a job well done by the most dysfunctional Congress America has ever seen.

Among the workers to receive a pay increase is Vice President Job Biden. As the Weekly Standard reports, citing disclosure forms, Biden made $225,521 last year and after the pay increase, he'll now make $231,900 per year. More: "Members of Congress, from the House and Senate, also will receive a little bump, as their annual salary will go from $174,000 to 174,900. Leadership in Congress, including the speaker of the House, will likewise get an increase." Somehow we have the feeling that Congress will be quite united behind this "order", just as the Senate was very united yesterday in itsdecision to continue spying on America's citizens.

From the Weekly Standard:

Here's the list of new wages, as attached to President Obama's executive order:

"A new executive order has been issued providing for a new pay schedule beginning 'on the first day of the first applicable pay period beginning after March 27, 2013,'"reports FedSmith.com. "The pay raise will generally be about 1/2 of 1%."

Jeryl Bier points to an example of the pay increase for average government executives:

"Not much of an increase, but an increase all the same," Bier notes.

And the timing isn't great either: Just as President Obama and Congress try to avert going over the "fiscal cliff," he doles out pay increases to federal workers.

UPDATE: According to a senior Republican congressional aide who has reviewed the executive order and consulted with the Congressional Budget Office, Obama's pay raise will cost $11 billion. "The CBO told us that the President’s pay raise for federal workers will cost $11 billion over ten years," says the aide.

The aide explains, "On the cost-estimate, CBO says the (discretionary) cost of the .5% pay-hike the President is calling for in the Exec Order – relative to a freeze – is about $500m in FY 2013 and $11 billion over the ten years from FY 13 - FY 22. The reason why the FY ’13 savings is only $500 million is because the pay hike as proposed by the President’s Exec Order would not go into effect until April 1^st, 2013 - when the current CR expires. So it only covers half the fiscal year. The annualized cost of the pay hike is about $1 billion/year."

http://thehill.com/blogs/on-the-money/budget/274869-fiscal-talks-continue-in-senate-with-deal-far-from-certain

Fiscal talks continue in Senate with deal far from certain

By Amie Parnes and Daniel Strauss - 12/29/12 03:56 PM ET

Congressional leaders and senior aides huddled on Saturday in a last-minute attempt to iron out a resolution in the so-called "fiscal cliff" crisis. But a deal -- at least for the time being -- seemed far from certain.

The rare weekend negotiations come on the heels of a meeting held at the White House on Friday as part of a last-ditch effort to resolve the looming fiscal crisis. If lawmakers do not come to an agreement in the next few days, taxpayers in all income brackets would see an increase in taxes and a slew of spending cuts would kick in.

One sticking point in the talks continues to be on taxes, according to aides. President Obama has reiterated that tax cuts should extend to the middle class, asking top earners to pay more in taxes. But Republicans have insisted that tax cuts be extended for all taxpayers.

Obama, who spent the day monitoring the talks from the White House, has indicated that he would support legislation that would raise taxes on those who earn more than $400,000. That threshold has been the subject of some discussions with Senate Minority Leader Mitch McConnell (R-Ky.).

But differences on other issues, including spending cuts, linger.

The Senate was expected to remain out of session on Saturday while Senate Majority Leader Harry Reid (D-Nev.) and McConnell, along with their senior aides, sought to strike a deal.

"Discussions are underway, but I wouldn't expect any news [or] announcements before the members are briefed," said one top Republican Senate aide.

If a deal isn't struck with McConnell, Democrats are likely to introduce a bill extending the Bush-era tax rates for income up to $250,000 a year. That legislation would also extend unemployment benefits for millions of Americans.

"I believe such a proposal could pass both houses with bipartisan majorities – as long as these leaders allow it to come to a vote," Obama said in his weekly address. "If they still want to vote no, and let this tax hike hit the middle class, that’s their prerogative – but they should let everyone vote. That’s the way this is supposed to work."

Senate Democratic aides seem confident that the legislation would pass the Senate, with Democrats supporting the bill with the help of some Republicans.

If the Senate passes the legislation, it would then force the House to take up the bill on the eve of the looming deadline.

and....

http://www.businessinsider.com/john-harwood-ben-white-fiscal-cliff-negotiations-going-badly-2012-12

Two Reporters Say The Fiscal Cliff Negotiations Are Going Badly

Joe Weisenthal | Dec. 29, 2012, 2:11 PM | 2,615 | 18

Today is the day that Harry Reid and Mitch McConnell are supposed to be negotiating a deal on the Fiscal Cliff.

Two of the top reporters covering the Fiscal Cliff, John Harwood of CNBC and Ben White Of Politico, have ominous tweets on this weekend's negotiations so far.

http://www.guardian.co.uk/world/2012/dec/29/senate-economy-us-fiscal-cliff

US economy on cliff-edge in Senate's war of political nerves

President Barack Obama warns Senate leaders to find compromise on taxation or lose input on rescue package

Rory Carroll
The Observer, Saturday 29 December 2012 12.40 EST
Jump to comments (33)

President Barack Obama gives a statement on the fiscal cliff negotiations on Friday.

President Barack Obama pauses during a statement on the fiscal cliff negotiations at the White House on Friday. Photograph: Evan Vucci/AP

America teetered on the fiscal cliff on Saturday as Senate leaders continued to haggle over a tax deal to avert a looming US economic crisis.

Leaders from both sides huddled on Capitol Hill in a last-ditch effort to agree a bill by Sunday which could be sent to both chambers of Congress before the clock runs out on Monday night. With voters, stock markets and foreign governments holding their breath, willing Republicans and Democrats to compromise, Washington was in febrile mood and veered between despair, hope and fatalism.

President Barack Obama gave Senate leaders an ultimatum to make a bipartisan deal by Sunday or face a vote based solely on his own measures.

"The American people are watching what we do here. Obviously their patience is already thin," he warned on Friday night after meeting Harry Reid, the Democrat majority leader, and Mitch McConnell, the Republican minority leader. "The hour for immediate action is here. It is now," said the president, adding he was modestly optimistic about a deal.

The lower chamber, the House of Representatives, which has a Republican majority, was due to convene on Sunday. Speaker John Boehner told colleagues to be ready to work through the new year and signalled that the house would vote on a deal that emerged from the Senate.

If no deal is done, 88% of Americans will see their taxes rise on 1 January, when Bush-era tax cuts expire. In addition, deep spending cuts will bite and two million long-term unemployed people will lose their benefits.

The Congressional Budget Office has warned that tumbling over the cliff will push the US back into recession and drive unemployment up to 9.1% from its current rate of 7.9%. US stock markets fell for the fifth consecutive day on Friday as investors waited anxiously for a resolution to the slow-moving drama.

Consumer confidence deflated, with ordinary Americans expressing alarm and anger. "I hate you Congress, get your God damn act together," seethed one typical tweet on #fiscalcliff.

Both sides are already preparing to deflect blame in the event of a debacle. Obama was due to make his case on NBC's Meet the Press, a scoop for the host David Gregory who is under police investigation for showing an empty gun magazine clip on air during a recent interview about gun control.

Obama's 11th-hour instruction to the Senate to seek a deal followed toxic rhetoric from both sides. Reid, the senate majority leader, accused Boehner of operating a "dictatorship" in the house and putting his job as speaker – which hangs in the balance – ahead of the national interest.

Ideological polarisation over how to tackle the federal deficit – Democrats wish to raise taxes, Republicans wish to cut spending – lies at the heart of Washington's gridlock.

With its Tea Party faction opposing even Republican-sponsored compromises, the GOP fears it will receive the most blame if the US falls off the cliff. However, economic crisis could also wreck Obama's second term and his quest for a legacy.

If no Senate deal is reached the president said he would propose a scaled-down package to cushion the fiscal fall by extending tax cuts for the middle-class and maintaining unemployment benefits. "If an agreement isn't reached in time between Senator Reid and Senator McConnell, then I will urge Senator Reid to bring to the floor a basic package for an up-or-down vote," he said.

Obama said his plan to let taxes rise for families who earn more than $250,000 would win a majority vote in both chambers, but that does not seem certain. Republicans wish to raise that ceiling to spare wealthier families tax rises.

Senate leaders pledged to try to hammer out a proposal to present to their caucuses by Sunday. "Whatever we come up with is going to be imperfect," said Reid. "Some people aren't going to like it, some people will like it less. But that's where we are. We have an obligation to do the best we can."

McConnell, speaking late on Friday, said a deal was feasible. "I am hopeful and optimistic," he said. Senator Chuck Schumer, a Democrat from New York, echoed that to NBC. "Sometimes it's darkest before the dawn," he said.

However, Senator Bob Corker, a Republican from Tennessee, was bleaker in an interview with CBS, saying the last-minute talks were merely cosmetic ploys to give the impression politicians were doing something. "This is a total dereliction of duty at every level. I've been very surprised that the president has not laid out a very specific plan to deal with this, but candidly Congress could have done the same. And I think the American people should be disgusted," he said.

http://www.politico.com/story/2012/12/fiscal-cliff-talks-continue-no-breakthrough-85579.html?hp=l1

Fiscal cliff talks continue, no breakthrough

By MANU RAJU and JOHN BRESNAHAN | 12/29/12 12:51 PM EST

Negotiations to resolve the fiscal cliff crisis continued Saturday, but there are no signs yet of a breakthrough, say sources close to the talks.

President Barack Obama held an eleventh-hour meeting with congressional leaders from both parties at the White House Friday, providing a badly needed jolt to the stalled negotiations to avoid large tax hikes and steep spending cuts set to take effect in a few days.

Senate Majority Leader Harry Reid (D-Nev.) and Minority Leader Mitch McConnell (R-Ky.) and their top aides are trying to hammer out an agreement this weekend, although they remain far apart on who should see their taxes go up beginning Jan. 1. Reid and McConnell agreed not to bring the Senate into session Saturday, giving them time to cut a deal, and their senior aides remain guarded in their public comments about the last-ditch negotiations.

Reid has declared that unless he reaches a deal with McConnell, the majority leader will offer a bill Monday to keep current lower tax rates in place for families making $250,000 or less. The Reid proposal would include a patch to the Alternative Minimum Tax to prevent it from hitting millions of middle-class Americans, as well as an extension of federal unemployment benefits for about 2 million Americans.

Reid is confident he can win such a vote by holding his own members and peeling off some Republicans. If Republicans decide not to filibuster the plan, Democrats would almost certainly push the bill through the Senate with their narrow majority, pressuring House Republicans to let the bill come to a vote on the eve of the fiscal deadline.

If McConnell or Republicans did filibuster the Reid plan, it would allow Democrats to blame GOP leadership for blocking a resolution to the fiscal cliff.

McConnell and White House aides have been privately discussing a proposal with an income threshold closer to the $400,000 level — as Obama proposed as a compromise in recent in talks with Speaker John Boehner (R-Ohio) — although there are major differences over estate taxes as well as whether to include spending cuts in the plan.

There are also major questions about what Boehner will support. The Ohio Republican told his members during a Thursday conference call that he doesn’t want to let a bill come to the House floor that would pass with mostly Democratic support. The speaker wants a big majority of the House GOP Conference behind any deal before he gives it his imprimatur, aides say both publicly and privately.

Another unknown is whether McConnell would be party to any deal with little backing among House Republicans. Senior GOP aides and senators say it’s unlikely.

During his weekly radio address on Saturday, Obama said he’s committed to finding a bipartisan compromise.

“Leaders in Congress are working on a way to prevent this tax hike on the middle class, and I believe we may be able to reach an agreement that can pass both houses in time,” Obama said. “We just can’t afford a politically self-inflicted wound to our economy.”

Both the House and Senate will convene in rare Sunday sessions, a sign of how serious party leaders view the fiscal cliff crisis and the potential fallout from a stalemate. Wall Street has already seen five straight down sessions, and the pace of market losses could accelerate if no deal is reached, analysts say.

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http://hotair.com/archives/2012/12/29/reid-mcconnell-working-on-new-fiscal-cliff-plan/

Reid, McConnell working on new fiscal-cliff plan

POSTED AT 11:31 AM ON DECEMBER 29, 2012 BY ED MORRISSEY

Looks like John Boehner may get his wish. After his Plan B collapsed, Boehner has insisted that the ball is in the Senate’s court, as the House has already passed legislation that would resolve the fiscal cliff. The Hill reports that Harry Reid and Mitch McConnell are now working on a plan that they will reveal sometime tomorrow — as the eleventh hour ticks away:

Senate Majority Leader Harry Reid (D-Nev.) and Republican Leader Mitch McConnell (Ky.) are working on an agreement to avoid across-the-board tax hikes and plan to show it to colleagues Sunday.

Senate leaders emerged optimistic from a Friday afternoon meeting at the White House with President Obama, Speaker John Boehner (R-Ohio) and House Democratic Leader Nancy Pelosi (Calif.). Vice President Biden and Treasury Secretary Timothy Geithner also attended. …

Both Reid and McConnell sounded hopeful they could craft an agreement over the next 24 to 36 hours, although Reid said he was under no illusion that members of his caucus would accept it without complaint.

“I’m going to do everything I can. I’m confident Sen. McConnell will do the same. But … whatever we come up with is going to be imperfect. Some people aren’t going to like it. Some people will like it less. But that’s where we are,” Reid said.

Reid has scheduled a Democratic caucus meeting for Sunday afternoon to give his colleagues a chance to weigh in on a potential deal.

McConnell said he would do the same.

“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,” McConnell said. “And so we’ll be working hard to try to see if we can get there in the next 24 hours.”

I’ll guess at the relative terms of the deal. It will lock in the Bush-era tax rates permanently for those earning below $400,000 — a heady bit of symbolism, as that’s the salary for the President — and allow rates above that to rise to 39.6%. It will patch the AMT — again — and address the other less-known aspects of the fiscal cliff. There probably won’t be much done to fix the sequester cuts at all, at least not immediately. That will end up waiting for the debt-ceiling fight, which will come in a couple of months, unless Democrats are willing to sweeten the pot to get a one-year extension as part of this deal.

If that’s the proposal, will Boehner go for it? Almost certainly; according to The Hill, he’s agreed in principle to allow an immediate floor vote on any bill the Senate can pass. If the Senate gets a bill passed purely on Democratic votes, then Boehner will probably instruct his caucus to vote “present” and let Democrats own the results. If it gets significant Republican support, the House vote will probably flow smoothly enough to allow conservatives worried about primary challenges to oppose it, and have Democrats do the heavy lifting for passage.

If that sounds as if this deal could have been struck weeks ago — or perhaps years ago — well, that just means you’ve been paying attention. Now all sides are worried about the fallout from failure, and anything will look better than nothing to some. Not to all, of course, and there will be still some substantial effort made on both sides to hold out for total victory, but leadership on both sides have squeezed out all of the painless good will they can from this standoff. The sooner they get this off the table, the more time they have until the next election for everyone to forget what a joke this turned out to be.

http://thehill.com/blogs/blog-briefing-room/news/274853-gop-rep-obama-doesnt-really-want-to-deal-on-fiscal-cliff

Schock: Obama 'doesn't really want to deal' on 'fiscal cliff'

By Daniel Strauss - 12/29/12 10:14 AM ET

Rep. Aaron Schock (R-Ill.) accused President Obama of not wanting to actually come to an agreement with Republicans on a deal to prevent "fiscal cliff" spending cuts and tax increases.

Schock's comments, during an interview Friday night with Fox News's Greta Van Susteren, came a few hours after Obama met with the top two Republicans and Democrats in the House and the Senate to discuss a deal to prevent the across-the-board spending cuts and tax rate increases ahead of the year-end deadline. After the meeting, Obama and the legislators indicated they were optimistic a deal could be reached before the end of the year.

But Schock said House Republicans have been the only ones actually making an effort to hammer out a deal.

"This is really the House having to negotiate with itself, and the president, who I believe is beginning to show his cards, which is someone who doesn't really want to deal, who for whatever reason believes that it's to his political benefit or a potential gain for us to go over this cliff, to try and make us look obstinate in the House and somehow, it's our fault," Schock said. "What we have been trying to negotiate. We've been trying to put ideas out there in good faith."Both the House and Senate are set to reconvene Sunday afternoon for votes. While the likelihood that a "fiscal cliff" deal will be ready to pass through both chambers that afternoon is remote, the Senate is expected to amend legislation that passed through the House with a new proposal to prevent the tax increases and spending cuts. After amending the bill, the Senate would send it back to the House.

http://thehill.com/homenews/administration/274855-obama-returning-to-sunday-talk-show-for-first-time-in-three-years

President returning to Sunday talk show for the first time in three years

By Amie Parnes - 12/29/12 10:19 AM ET

President Obama will appear on NBC's "Meet the Press" on Sunday morning in his first appearance on the news program since 2009, the network has announced.

The Obama interview comes hours before the so-called "fiscal cliff" deadline. Obama has called on Congress in recent days to pass legislation that would prevent income taxes from rising and spending cuts from taking effect.

In his radio address on Saturday, Obama said the recovering economy "can't afford a politically self-inflicted wound," and urged Congress to immediately pass legislation.

Obama will be interviewed by the show's moderator, David Gregory, who was supposed to be on vacation after he found himself at the center of an investigation by the Washington Metropolitan Police Department.

The investigation began after Gregory revealed what appeared to be a high-capacity gun magazine, which is illegal in D.C., on the set during last Sunday's show during an interview with the National Rifle Association's Wayne LaPierre.

http://thehill.com/blogs/on-the-money/budget/274813-from-democrats-fiscal-fallback-plans

Democrats prepare tax-cut bills in case nation goes over 'fiscal cliff'

By Peter Schroeder - 12/29/12 11:00 AM ET

Leading Democrats are putting together fallback proposals if Washington fails to reach a deal on the “fiscal cliff” that would allow the party to cast itself as seeking to cut taxes.

“Of course, I’ve got a backup plan in the event that we don’t succeed here,” Sen. Max Baucus (D-Mont.), chairman of the Senate Finance Committee, said Friday. “I’m sure the White House has one too.”

Tax rates are set to expire on most households in January if Congress does not act to extend some of the rates, something some Democrats have long seen as giving their party an advantage. Once the nation goes over the fiscal cliff, pressure would build on Congress to approve lower rates for taxpayers, most of whom make much less than $250,000 per year.

Baucus did not provide details on his post-cliff plan, and emphasized that he believes that Congress should find a way to avoid the fiscal cliff before it arrives.

After meeting with President at the White House on Friday, Senate Majority Leader Harry Reid (D-Nev.) and Republican Leader Mitch McConnell (Ky.) are working on a fiscal deal. They plan to show it to colleagues Sunday.

However, the Montana Democrat acknowledged that there may be some advantages that emerge after a cliff dive that could help usher in a deal.

“That’s when the pressure really beings to mount, after the first of the year,” he said. “Some argue it would be easier to do it next year because the pressure’s greater. My view is that we should live up to our responsibilities.”

A common theory is that it would be easier to convince Republicans to vote for a legislative package after the fiscal cliff hits, since it would then entail voting for a tax cut as opposed to choosing which lower rates would be allowed to expire. Sen. Patty Murray (D-Wash.) made such an argument this summer, well before fiscal cliff talks began in earnest.

Sen. Sherrod Brown (D-Ohio) said he believed going over the cliff would put pressure on both sides, but that Democrats would enjoy public support in their efforts to avoid major cuts to entitlement programs.

“I think the public sees even more clearly that the path is not that complicated,” he said. “Ask the wealthy to pay a little bit more, making fair cuts everywhere. The public doesn’t want to see us go after Social Security and Medicare.”

Republicans have been more mum on whether they have some fallback tax plan in the works if the nation goes over the cliff, and have instead trained their focus on the next fiscal standoff: raising the debt ceiling.

Sen. Charles Grassley (R-Iowa) told The Hill that the debt limit is a vital negotiating tool for the GOP in its hunt for spending concessions.

“The whole business of the debt ceiling…that’s the leverage we’ve got,” he said. “See, all of the debates since the election until today, including today, have been about tax increases…we’ve got to start talking about spending too much.”

Treasury Secretary Timothy Geithner told Congress Wednesday that the government will reach its $16.4 trillion borrowing cap on Dec. 31, and the limit will need to be raised sometime in the next few weeks.

Multiple GOP lawmakers indicated that their goal now is to get through the fiscal cliff standoff one way or another, at which point Republicans can regroup and focus their efforts on extracting concessions from the White House in exchange for a debt-limit boost.

“Give the president whatever he wants [on taxes],” Grassley said hypothetically. “All it covers is somewhere between eight and 12 percent of the $1.1 trillion deficit.

“When you get beyond this fiscal cliff deal, the public starts looking at what we’re trying to do to cut down on spending as opposed to increasing taxes, that strengthens our hand,” he added.

A House GOP aide said the debt limit provides a “natural venue” for Republicans to continue to push for preferred fiscal policies, once the fiscal cliff is in the rearview mirror.

A spokeswoman for House Ways and Means Committee Chairman Dave Camp (R-Mich.) said Friday that if 2013 arrives with no fiscal cliff deal in place, the plan from House Republicans will be to continue pushing the Senate to take up two bills already approved by the House. One bill would have extended all of the Bush tax cuts, while the other would have replaced military spending cuts with other cuts to mandatory spending and are viewed as nonstarters by Democrats.

“The House has acted to avert the entire fiscal cliff, both the January 1 tax hikes and the sequester. Our efforts to enact those goals will continue if there is no agreement prior to January 1," the spokeswoman said.

A spokesman for Senate Minority Leader Mitch McConnell (R-Ky.) also pointed to that legislation when asked about potential contingency plans.

With a fiscal cliff deal still very much in doubt, Sens. Lamar Alexander (R-Tenn.) and Bob Corker (R-Tenn.) unveiled a new proposal Friday that would slow entitlement spending by nearly $1 trillion in exchange for a equally sized increase to the debt limit.

The pair said the outcome of fiscal cliff negotiations is apparent in broad strokes — policymakers will strike some deal to avert tax hikes on most Americans, while allowing them to rise for some portion of top earners.

“For almost all Americans, when the dust settles, individual income taxes won’t be going up next year,” said Alexander.

“We know that that’s going to be the outcome,” added Corker. “But we hope that then we will turn to the serious business of reforming our entitlements.

“Unfortunately for America, the next line in the sand is going to be the debt ceiling,” he said.

Catharsis Ours

Saturday, December 29, 2012

Fiscal follies - Fiscal Cliff hanger winds toward Sunday " Do or Die " sessions in Congress ......