Following a holiday weekend with no progress on cliff talks, U.S. Senate majority leader, Sen. Harry Reid (D-Nev.), offered a grim prognosis on the fiscal cliff just days before taxes rise and major spending cuts start to take effect.
Blaming Republicans, the Nevada Democrat said there did not appear to be enough time to get a deal before the New Year. "I don't know time wise how it can happen now," Reid said as he opened a rare holiday week session of the Senate.
Nearly all the major players in the fiscal cliff negotiations are starting to agree on one thing: a deal is virtually impossible before the New Year. Unlike the bank bailout in 2008, the tax deal in 2010, and the debt ceiling in 2011, the Senate almost certainly will not swoop in and help sidestep a potential economic calamity.
Hopes of a grand-bargain — to shave trillions of dollars off the deficit by cutting entitlement programs and raising revenue — are shattered. House Republicans already failed to pass their “Plan B” proposal. And now aides and senators say the White House’s smaller, fall-back plan floated last week is a non-starter among Republicans in the Senate, much less the House of Representatives.
On top of that, the Treasury Department announced Dec. 26 that the nation would hit the debt limit on Dec. 31, and would then have to take “extraordinary measures” to avoid exhausting the government’s borrowing limit in the New Year.
The House originally indicated that the Senate needs to take the lead in negotiations. Speaker John Boehner’s leadership team said bluntly: the “Senate first must act” before the House will consider additional legislation to avoid the cliff. However, House majority leader, Rep. Eric Cantor (R-Va.), has confirmed that the chamber will be returning on Sunday, Dec. 30.
The White House on Dec. 21 floated a plan it considered “scaled-back” from its original proposal, seeking to extend the Bush-era rates only for those who earn less than $250,000, to extend expiring unemployment benefits, and to delay automatic spending cuts known as sequestration. There is also talk of limiting the impact of the alternative minimum tax on the middle-class, though that would only drive up the package’s price tag.
Republicans scoffed at that plan. And McConnell aides say they have yet to see any details, making it impossible for them to assess whether Republicans — or even conservative Democrats — would allow for such a proposal to pass.
Republicans say Obama must take the long view with no deal in sight. “Remember who the speaker of the House was during the Hoover administration?” Arizona Sen. Jon Kyl, the No. 2 in the Senate Republican hierarchy, said last week. “It was the Hoover Recession. I would think the president and his people would be thinking a little longer range than how the polls would look like this weekend.