Lawmakers are running out of time to seal a deal to prevent tax hikes and spending cuts. With only hours left before the start of 2013, the policies that comprise the fiscal cliff will start to go into effect as soon as tomorrow unless legislation is enacted immediately.
Congressional leaders and the President worked through the weekend to try to negotiate a compromise. Although President Obama and Speaker Boehner had been the central players in the negotiations in recent weeks, Vice President Biden and Senator Minority Leader McConnell began their own talks over the weekend. Their negotiations continued through Monday morning, although no deal had yet been reached at the time of publication.
Some concessions have been made, however. It has been reported by several news sources that Democrats have relented on raising taxes on household income over $250,000 a year. Instead, taxes would only be raised on income above $450,000 a year—a number that could go even higher if Republicans have their way. Republicans have reportedly given up on a proposal to slow the growth of Social Security cost-of-living increases—a major stumbling block for liberals.
It is unclear if or how lawmakers will address budget sequestration. Under existing law, $109 billion in across-the-board spending cuts are required each year for the next decade. This would mean that non-defense discretionary programs, such as the National Science Foundation, National Institutes of Health, Department of the Interior, National Oceanic and Atmospheric Administration, and the Environmental Protection Agency, face mandatory 8.2 percent budget cuts next year, with further cuts over the next decade. Defense, including medical and environmental research supported by the Department of Defense, and security programs would be cut by 9.4 percent in 2013, with additional cuts in the subsequent years.
Although addressing the Bush-era tax cuts would likely calm already jittery financial markets and ease taxpayer concerns, the sequestration could harm the nation’s economic growth. According to the Bipartisan Policy Center, sequestration would reduce the nation’s economic growth by half a percentage point in 2013 and result in the loss of a million jobs.
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