Today in the ‘fiscal cliff’: Cliff-diving or bust?

December 3, 2012

Both sides have dug in their heels on the "fiscal cliff" with little signs of progress. It might be tempting to interpret their bluster as the kind of political theater that inevitably plays out before a deal is reached. But things aren't going much better back stage, either. "Congressional aides for both parties say current back-channel talks are just as unproductive as those taking place in front of the TV cameras," the Wall Street Journal explains.

cliff fiscal
(AFP/Getty Images)

The pessimism about reaching a deal before Dec. 31 has led to a new flood of predictions that we'll be headed over the fiscal cliff from Republicans like Sen. Lindsey Graham (S.C.), who blame President Obama for throwing the country overboard. But there also are conservatives who are urging Republicans to go over the cliff to prevent Republicans from making undesirable concessions to Democrats who hold the Dec. 31 deadline as leverage. "As long as the so-called fiscal cliff looms the GOP operates from a position of fear, which is a terrible position from which to negotiate," writes Erick Erickson. "The GOP should do now what it should have done back in 2011—shoot the hostage."

On the left, there have been plenty of cliff-divers who believe that going over would be the best way to get Republicans to concede on taxes. But now there are also multiple reports that Obama himself is willing, however reluctantly, to go over the cliff should Republicans refuse to raise taxes on the top two percent of Americans. 

At the same time, as the prospects of going over the cliff seem to have increased, some on the right are urging Republicans to consider giving in on taxes, pointing to recent polls indicating that the public would be more likely to blame the GOP than Obama if Washington fails to reach a deal in time. The Weekly Standard's Bill Kristol suggested that it might "be prudent for Republicans to acquiesce, for now" to tax hikes on the top 2 percent, in exchange for a lower payroll tax for two years and reversing the sequester.

ABC's Jon Karl also reports that Republicans are considering a "doomsday plan" should talks continue to disintegrate that entail a similar concession to Obama on tax rates, but nothing else:

House Republicans would allow a vote on extending the Bush middle class tax cuts (the bill passed in August by the Senate) and offer the president nothing more – no extension of the debt ceiling, nothing on unemployment, nothing on closing loopholes. Congress would recess for the holidays and the president would face a big battle early in the year over the debt ceiling.

House Speaker John Boehner (R-Ohio) has already denied that such a compromise is under consideration. But it's the latest sign that Republicans recognize that they don't have the upper hand in a stand-off that's getting increasingly tense.

Cliff notes:

—President Obama took questions on Twitter about the fiscal cliff this afternoon.

—There was an unexpectedly large slump in the manufacturing sector in November, with several manufacturers mentioning the fiscal cliff as a drag on growth. 

—Boehner's misfire on how tax hikes would affect small-business owners.

—The president of the St. Louis Federal Reserve thinks the economy could grow 3 percent or more if we manage to avoid the fiscal cliff.

—The fiscal cliff meets "Homeland."

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Brad Plumer | December 3, 2012