US fis­cal cliff talks stalled but progress pos­si­ble

The Pak Banker - - Front Page -

WASHINGTON

US law­mak­ers have made lit­tle progress in the past 10 days to­ward a com­pro­mise to avoid the harsh tax in­creases and government spend­ing cuts sched­uled for Jan­uary 1, a se­nior Demo­cratic se­na­tor said on late Sun­day.

The United States is on course to slash its bud­get deficit nearly in half next year. Clos­ing the gap that quickly, which in Washington is re­ferred to as go­ing over a “fis­cal cliff,” could eas­ily trig­ger a re­ces­sion.

“Un­for­tu­nately, for the last 10 days, with the House and Congress gone for the Thanks­giv­ing re­cess ... much progress hasn’t been made,” Dick Durbin, the No. 2 Se­nate Demo­crat, told me­dia. Se­ri­ous ne­go­ti­a­tions are ex­pected to re­sume this week. Demo­cratic and Repub­li­can law­mak­ers have been try­ing to con­vince the pub­lic - and fi­nan­cial mar­kets - that they are will­ing to com­pro­mise and can reach a deal be­fore the end of the year.

Durbin in­di­cated Democrats might ac­cept a re­form of the government’s Medi­care health in­surance pro­gram for the el­derly that would make higher-in­come se­niors pay more for their care. Democrats tra­di­tion­ally op­pose lim­it­ing Medi­care ben­e­fits ac­cord­ing to in­come, a prac­tice known as “means test­ing.” Durbin said Med­i­caid, a pub­lic health in­surance pro­gram for the poor, also could be over­hauled.

But Durbin said So­cial Se­cu­rity, the fed­eral government pen­sion pro­gram, needs only small tweaks to en­sure long-term sol­vency rather than ma­jor re­forms. A dead­line looms over the talks. With­out ac­tion by law­mak­ers and Pres­i­dent Barack Obama, roughly $600 bil­lion in tax in­creases and spend­ing cuts will start to hit house­holds and com­pa­nies in early Jan­uary.

Repub­li­cans are averse to Democrats’ plan to raise in­come tax rates on the wealth­i­est Amer­i­cans, which Repub­li­cans say would hurt job cre­ation. Repub­li­cans also want to cut spend­ing on so­cial pro­grams more than Democrats say they will ac­cept.

House Speaker John Boehner has called for a short­term plan to avert the fis­cal cliff to pave the way for Congress and the White House to agree to work dur­ing 2013 on com­pre­hen­sive tax re­form and longer-term spend­ing cuts.

But Repub­li­can Se­na­tor Bob Corker said both sides need to show “po­lit­i­cal courage” and reach a big­ger $4 tril­lion deficit re­duc­tion deal that in­cludes both in­creases in rev­enues and cuts in spend­ing by the end of the year.

“Kick­ing the can down the road — set­ting up a process for to­ken deficit re­duc­tion to­day with the prom­ise of more re­forms later — is mis­guided and ir­re­spon­si­ble and shows a to­tal lack of courage,” Corker wrote in an ed­i­to­rial in the Washington Post.

A grow­ing group of Repub­li­can law­mak­ers are loos­en­ing their ties to Grover Norquist, the anti-tax ac­tivist fa­mous for get­ting elected of­fi­cials to sign a pledge that they will vote against any tax in­creases.

Repub­li­can Se­na­tor Lind­sey Gra­ham said Repub­li­cans will al­low tax rev­enues to rise as long as so­cial spend­ing pro­grams are re­formed. “I will vi­o­late the pledge - long story short - for the good of the coun­try, only if Democrats will do en­ti­tle­ment re­form,” he told “This Week.”

Gra­ham said he sup­ported boost­ing rev­enues by clos­ing tax loop­holes rather than by rais­ing tax rates. Repub­li­can Se­na­tor Saxby Cham­b­liss said last week he “cared more about the coun­try” than a 20year-old pledge. On Sun­day, Repub­li­can Rep­re­sen­ta­tive Peter King, chair­man of the House Home­land Se­cu­rity Com­mit­tee, told NBC’s “Meet the Press” he agreed with Cham­b­liss.

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