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Newly elected Congressional freshmen of the 113th Congress walk away after a class picture on November 15, 2012 in Washington DC. The sitting duck Congress will have to make a decision about the fiscal cliff before they take office.
With each passing day, the pressure increases on Capitol Hill politicians to reach a compromise on the budget. If they neglect to do so before the December 31, 2012 deadline, then 2013 will kick off with a host of undesirable economic factors. Workers would see their payroll taxes increase, businesses would see tax deductions go out the window, and the Bush tax cuts would expire without being replaced.
Furthermore, spending cuts would go into effect that would deeply slash Medicare and the Pentagon’s defense budget. Without a new budget deal, most economists predict that the country would suffer financially, with the stock market taking a massive hit as investors start to panic about the economy. After President Obama’s reelection, he announced that he was given a mandate by voters to increase taxes on the wealthy as a means to deal with the budget.
As Republicans also failed to secure the Senate majority, it appears as if they are now inclined to budge on some of their previous steadfast positions. However, Democrats could be poised to push hard on cutting defense and raising taxes in lieu of making any changes to entitlement programs. Which side will be the first to buckle? How are negotiations progressing thus far? What lies ahead in the upcoming month before the deadline?
Aaron Blake, Political Reporter, The Washington Post
Paul West, Political Writer, Los Angeles Times