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Publish Date29/12/2012 09:59:54 AM
Last Update31/12/2012 07:54:42 AM
U.S. lawmakers are set to resume budget talks over the weekend in yet another desparate attempt to avert the looming fiscal cliff after Friday talks ended with again little progress.
President Barack Obama and Vice President Joe Biden met Congressional leaders from both the Democratic and Republican parties at the White House on Friday to break the deadlock and avert the looming tax hikes and spending cuts set to take effect in a few days.
The talks led to no substantial change or announced breakthrough and are set to resume over the weekend, with calls from Obama for an at least a modest deal that would limit the impact of the harsh automatic tax hikes and spending cuts worth almost $600 billion.
President Obama remains optimistic still over a deal to be reached! After the meeting President Obama declared himself “modestly optimistic” and said “the hour for immediate action is here."
The pressure is now hanging more on the Senate to try to master a bipartisan deal by Sunday for a vote that would be able to pass the Republican-House majority. The gridlock over tax increases and spending cuts remains persistent and the least hoped for is a patch deal to support the economy and protect the middleclass American that will feel the squeeze of expiring tax breaks and suspension of unemployment benefits.
Senate Majority Leader Harry Reid and Republican Minority Leader Mitch McConnell said they will try to reach a deal to present to the Senate and both sounded hopeful of a breakthrough.
The hopes for a deal are not rock solid, with expectations that no major breakthrough might be seen and the legislation will likely alleviate the impact of the looming cliff and delay the ongoing debate on the budget for the next congress that will be sworn in January 03.
According to sources the deal is likely to include the extension of tax breaks for middleclass Americans and a slight increase on top earners. Also expected to include some extension in spending with unemployment benefits, provisions to prevent reductions in Medicare payments to doctors, and also prevent a scheduled increase in milk prices.
A Reid-McConnell deal that would pass the Senate returns the pressure again on Republican House Speaker John Boehner. McConnell assured that he will not agree to something that Boehner or the House can’t support. If the bill passes the Senate the House then can vote on it or amend it and send it back for another vote, and Boehner is likely to depend on Democrats for support as the Republican majority will still reject some increases in taxes!
The House and Senate are scheduled to return to Washington for a Sunday session, and according to Congressional records would be the first time for the Senate and House to cast a vote on Sunday since October 29, 2000.
With time running short to the looming December 31 deadline the hope for a deal slims. The inability to reach a deal on the debt ceiling will also extend the uncertainty in Washington for the coming months, and likely will give the House a new pressure card on the President to accept their concessions on taxes and broaden the spending cuts!
Treasury Secretary Timothy Geithner informed Congress on Wednesday that the government will hit the debt ceiling of $16.4 trillion. He wrote in a letter to Congress "I am writing to inform you that the statutory debt limit will be reached on December 31, 2012".
The Treasury department will begin using extraordinary measures authorized by law to finance about $200 billion of deficits that can by the government a couple of months or else it will force the United States to default on its obligations!
It will be another heated weekend for the United States and the tension remains evident on financial markets. U.S. equities ended deeply red in the last Friday of the year ahead of the New Year celebrations and expected thin trading Monday on fears lawmakers will not be able to reach a deal to avert the cliff that will send the U.S. back to recession.
The S&P 500 lost 1.1 percent to close at 1,402.43, its biggest drop since November 14.
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