CFR Update: Fiscal Cliff Talks Down to the Wire 12/28

Top of the Agenda: Fiscal Cliff Talks Down to the Wire

President Barack Obama has summoned Congressional leaders to the White House on Friday afternoon for another round of discussions aimed at avoiding the so-called fiscal cliff (BBC)

. Many analysts say the massive set of tax increases and spending cuts currently scheduled for year's end could unhinge the U.S. recovery and cause ripple effects throughout the global economy. The sticking point of negotiations remains taxes. Democrats are seeking to retain tax cuts for households earning less than $400,000, while increasing taxes for the wealthiest of Americans. Republicans would like to extend tax cuts for all--or at least those earning less than $1 million--and are seeking larger cuts to some social programs like Medicare. Analysts say the two parties remain divided and suggest a legislative compromise will be difficult to reach in the next four days. In response to the political uncertainty (WaPo), Wall Street has experienced its greatest volatility since the summer.

Analysis

"With such pettiness and ill will from congressional leaders, it will be little wonder if there is no deal. But avoiding the [fiscal] cliff

, even with a stopgap, is imperative. Though many of the worst impacts can be put off for a bit, any government project with a lead time, including those at the Pentagon, would immediately be at risk, and federal contracting and tax collection could become a shambles," writes the Washington Post.

"It is important to understand that the fiscal cliff is a charade. There are, to be sure, many conscientious debt reformers

working to avert our proclaimed year-end epic fall—along with many cynics who are using the occasion to advance pet projects that will make the debt problem worse. But all concerned are working within a fiscal system that has become seriously pathological," writes Christopher Demuth for the Weekly Standard.