Going into the final weekend of 2012, efforts to address the impending “fiscal cliff” have to date not happened. Therefore, members of both the Republican and Democrat parties have committed to work through the weekend in an attempt to stave off the expiring tax breaks and spending cuts.
But there is reason for hope in the final days of averting the crisis, as a meeting on Friday between Senate leaders Harry Reid and Mitch McConnell did lead to an announcement that the Senate would not formally meet on Saturday to allow members to focus on drafting a bill. According to McConnell, the efforts may lead to bill as early as Sunday.
“We need to have everybody step back a bit,” noted Reid. Reid went on to call the meeting between him and McConnell “very constructive.”
Even with reason for optimism, a done deal is by no means a foregone conclusion, as there are a large number of tax cuts that will expire come January 1, as well as spending cuts that will enter various defense and other programs. There simply may not be enough time left in the year to draft and execute the necessary steps to pass a bill. The more specific measures put into the bill to address areas of need, the longer it will take for members of the House and Senate to read and approve, as additional measures are more likely to raise areas of controversy to could result in a failure to get a passing vote.
President Obama noted that he is “modestly optimist” about Senators Reid and McConnell pulling together a bill in the final days of the year. Should they fail, President Obama noted the Senate should vote on another proposal the President has supported.
“The hour for immediate action is here, it is now,” Obama stated. “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.”
If nothing else, the efforts by Reid and McConnell have shown that the Senate will likely take the first steps in passing any measure that could stave off the fiscal cliff. To date, leaders of the House and Senate have each stated that the other should take the first steps in putting forth a bill.
Details of the bill the Senate is working on are not clear, but at a minimum it would likely extend the existing tax cuts enjoyed at present by most Americans and likely prevent a significant increase in estate taxes that are slated to go into effect. Those making more than $250,000 would likely see an increase in taxes.
In the event the Reid and McConnell backed plan is not successfully passed, the Obama backed plan would be another option, although it would likely fail to address various keys areas sought in thorough plan to address the fiscal cliff. Areas lacking could include deficit reduction, tax law changes, and reductions in entitlement spending. However, President Obama’s plan would continue unemployment benefits for over one and a half million people for whom those benefits are about to expire.
If nothing else, it is possible that the Internal Revenue Service might forego asking employers to implement the increase taxes, to buy the Senate and House additional time to address the issue next year.
Mark has been a contributor to legal web sites related to bankruptcy, tax, and criminal law since 2011. He has an Accounting degree from Texas A&M University.