9 reasons why America might go over the fiscal cliff

Veteran political analyst Pete Davis offers up a list of possible impediments to a deal on avoiding the fiscal cliff:

1. President Obama insists on a tax rate increase on those earning $250,000 or more, and House Republicans balk;

2. President Obama and Democrats refuse to accept revenue increases that won’t be scored by CBO, i.e. that depend upon tax reform and/or upon an assumed increase in economic growth;

3. President Obama insists on a Making Work Pay tax credit to replace the lost 2% payroll tax cut for working Americans that Republicans won’t accept;

4. House Republicans insist on entitlement cuts that Senate Democrats won’t accept. Certainly, Senate Democrats see Social Security as completely off the table, and Medicare cuts will be difficult to achieve because most of the easier cuts were used to pay for ObamaCare;

5. Everyone wants to repeal the $109 b. sequester, but Republicans may object if it’s not “paid for;”

6. Democrats want bigger defense cuts than Republicans will accept;

7. Discretionary spending can be shaved a bit more, but not much more without incurring Democratic opposition;

8. Republicans may refuse to accept a debt limit increase that is not “paid for.” A one-year hike would cost about $1.2 tr. There’s no way they could pay for that.

So what’s Davis’s best guess on what happens?

– 60% chance nothing happens, and we go over the cliff in January;

– 40% chance of a modest, pre-Christmas “downpayment” deal “with procedures to deliver tax and entitlement reform … expect to be underwhelmed.” And if he were to offer a 9th impediment, it would be this:

One big final impediment will remain after a deal is announced — The House may not pass it. In July, 2011, House Speaker John Boehner (R-OH) thought he had agreed to a deal with President Obama which his colleagues would support, but House Republicans rejected it. He was put in the embarrassing position of having to return to the bargaining table to cut a smaller, kick the can down the road deal, with the Super Committee that failed, and the $109 b. sequester that no one wants. I’m sure he’ll be a lot more careful this time around to whip his support before finally signing off on a deal. Anything the House Republican Caucus will pass is unlikely to attract more than a handful of Democratic votes, even if President Obama supports it. Boehner will not get united House Republican support for any deal. He may need Democratic votes to pass it, and Nancy Pelosi (D-CA) is unlikely to supply them. That’s the problem.

One thought on “9 reasons why America might go over the fiscal cliff

  1. I hope we DO go over the cliff. It will seal the Tea Party’s and Norquist’s fates forever and consign both of them to the ash heap of history.

    BTW, Jimmy boy: if the markets see the US is THAT serious about clamping down on deficits, I see a rally.

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