EU leaders are edging towards a compromise deal on the 2014-2020 budget after all-night talks, officials say.
See the article here: VIDEO: EU budget summit wrestles over cuts
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EU leaders are edging towards a compromise deal on the 2014-2020 budget after all-night talks, officials say.
See the article here: VIDEO: EU budget summit wrestles over cuts
EU leaders meet through the night in Brussels amid signs of edging towards a compromise deal to overcome deep divisions over the 2014-2020 budget.
Read more: EU edges towards deal on budget
Mohamed El-Erian writes that the compromise does little to address the headwinds that undermine growth, hold back corporate investment, and dampen job creation.
Read the original here: Mohamed El-Erian: Deal is a mixed bag
It doesn’t take a math genius to understand that this grand compromise to avoid the dreaded fiscal cliff is highly inadequate.
The rest is here: Investor enthusiasm over fiscal deal will be short-lived
Hopes of avoiding tax rises for majority of Americans reside with Republicans as prospect of Tea Party rebellion lingers
The fate of a deal to resolve America’s fiscal cliff crisis hung in the balance on Tuesday, in spite of an overwhelming vote in the Senate hours earlier in favour of a compromise bill aimed at ending the long-running saga.
President Barack Obama hailed the Senate vote and called on the House of Representatives to act “without delay”. But senior figures in the House, where the Republicans have a majority, expressed dissatisfaction with the deal and it was unclear on Tuesday what its fate would be.
Obama was looking for a deal to be in place to calm Wall Street before it re-opened on Wednesday. But the office of the Republican House speaker, John Boehner, could not confirm whether he would even schedule a vote on the bill. Boehner, in theory, should be able to push the bill through with a combination of moderate Republicans and Democrats, even in the face of a revolt by Tea Party-backed members of Congress.
Eric Cantor, the Republican leader in the House, said he did not support the bill, further raising questions about how Congress will address automatic spending cuts and tax increases that began to take effect just after midnight.
Both Republicans and Democrats expressed unhappiness with the bill. Democrats accused Obama of giving too much ground to the Republicans, setting too high a threshold for tax increases to kick in. Republicans claimed the deal failed to address America’s burgeoning deficit.
One of the conservative House Republicans, Michele Bachmann, indicated she would vote against, saying the bill increased revenue without dealing with spending. “It is a cynical, planned move by the president,” she told Congress.
Republicans scheduled at least two closed-door meetings on Tuesday to discuss the issues with their leadership. The White House dispatched vice-president Joe Biden to Congress to persuade liberal Democrats in the House to back the bill.
Democrats in the House emerged from the briefing with Biden pledging support, and urging Republican colleagues to accept the bill unamended.
Minority House leader Nancy Pelosi said the legislation sent from the Senate represented a “historic” bi-partisan compromise. She also piled pressure on Boehner to allow the measures to go to a vote in the House, noting that he had previously suggested that any bill from the Senate would be put in front of representatives.
“That is what he said, that is what we expect. That is what the American people deserve,” Pelosi said.
The bill passed by the Senate, with 89 senators in favour and eight against, is a messy, short-term deal that raises taxes on the wealthiest but postpones for two months any consideration of spending cuts. The vote came at 2am on Tuesday, too late to prevent the country breaching the midnight fiscal cliff deadline. Taxes for all Americans automatically went up on 1 January and all federal programmes, from defence to welfare, faced deep spending cuts.
To reverse this, the House must also vote for the bill, which confines tax rises to individuals earning $400,000 or more a year and households earning $450,000 or more. It postpones spending cuts for two months, to allow further negotiations. Estate tax also rises, to 40% from 35%, but inheritances below $5m are exempted from the increase. Benefits for the unemployed are extended for another year.
The House presents a much bigger hurdle than the Senate, not only because the Republicans have a majority but because of the presence of a bloc of Tea Party-backed Republicans. The Republicans have 241 members to the Democrats’ 191.
Boehner’s instinct is towards compromise but he has had trouble keeping the Tea Party bloc under control. Theoretically, he has enough votes to push a bill through, but he is coming up for re-election as Speaker and will not want to alienate conservative Republicans.
The deal was thrashed out in the past few days between Biden and the Republican leader in the Senate, Mitch McConnell. It partly fulfills one of Obama’s election campaign promises: to raise taxes on the wealthiest. But Obama was forced to compromise: he wanted higher taxes to kick in at $250,000 a year.
In a statement, the White House welcomed the compromise: “For the first time in 20 years, Congress will have acted on a bipartisan basis to vote for significant new revenue. This means millionaires and billionaires will pay their fair share to reduce the deficit through a combination of permanent tax rate increases and reduced tax benefits.”
The statement added that 98% of families would not face tax rises, assuming the House also voted for the deal.
Obama had wanted, as part of a deal, an assurance from the Republicans that they would not mount another showdown in a few months’ time, when he has to raise the debt ceiling. But he failed to get this, ensuring yet another confronation between the White House and Repubicans in Congress in late February and early March.
The Republican senator John McCain, who voted for the deal, said: “Despite my disappointment with many aspects of this agreement, I cannot in good conscience stand by and watch taxes go up on all Americans.
“However, it should be embarrassing to all of us that it took until the last hours of the last day of the year to address an issue we should have dealt with months ago. This marks another sad chapter in what has been the least productive Congress since 1947.”
• Taxes will rise for individuals earning more than $400,000 and households that make more then $450,000, with the rate rising to a maximum of 39.6% from the current 35%. Capital gains and dividends in excess of those amounts would be taxed at 20%, up from 15%
• Estate tax will rise to 40% on the portion of estates exceeding $5m in value. At the insistence of Republicans, the $5m threshold would rise each year with inflation.
• Tax breaks will be maintained for families with children, for low-earning taxpayers and for those with a child in college. The alternative minimum tax, which was due to expand to affect an estimated 28 million households for the first time in 2013, with an average increase of more than $3,000, remains at its present level.
• The deal leaves untouched a scheduled 2 percentage point increase in the payroll tax, ending a temporary reduction enacted two years ago to help revive the economy.
• Benefits for the long-term unemployed, which were about to expire for an estimated two million jobless Americans, will be extended for a year.
• A 27% cut in fees for doctors who treat Medicare patients will be postponed for a year. Also included in the deal is a provision to prevent a threatened spike in milk prices.
President Barack Obama warns Senate leaders to find compromise on taxation or lose input on rescue package
America teetered on the fiscal cliff on Saturday as Senate leaders continued to haggle over a tax deal to avert a looming US economic crisis.
Leaders from both sides huddled on Capitol Hill in a last-ditch effort to agree a bill by Sunday which could be sent to both chambers of Congress before the clock runs out on Monday night. With voters, stock markets and foreign governments holding their breath, willing Republicans and Democrats to compromise, Washington was in febrile mood and veered between despair, hope and fatalism.
President Barack Obama gave Senate leaders an ultimatum to make a bipartisan deal by Sunday or face a vote based solely on his own measures.
“The American people are watching what we do here. Obviously their patience is already thin,” he warned on Friday night after meeting Harry Reid, the Democrat majority leader, and Mitch McConnell, the Republican minority leader. “The hour for immediate action is here. It is now,” said the president, adding he was modestly optimistic about a deal.
The lower chamber, the House of Representatives, which has a Republican majority, was due to convene on Sunday. Speaker John Boehner told colleagues to be ready to work through the new year and signalled that the house would vote on a deal that emerged from the Senate.
If no deal is done, 88% of Americans will see their taxes rise on 1 January, when Bush-era tax cuts expire. In addition, deep spending cuts will bite and two million long-term unemployed people will lose their benefits.
The Congressional Budget Office has warned that tumbling over the cliff will push the US back into recession and drive unemployment up to 9.1% from its current rate of 7.9%. US stock markets fell for the fifth consecutive day on Friday as investors waited anxiously for a resolution to the slow-moving drama.
Consumer confidence deflated, with ordinary Americans expressing alarm and anger. “I hate you Congress, get your God damn act together,” seethed one typical tweet on #fiscalcliff.
Both sides are already preparing to deflect blame in the event of a debacle. Obama was due to make his case on NBC’s Meet the Press, a scoop for the host David Gregory who is under police investigation for showing an empty gun magazine clip on air during a recent interview about gun control.
Obama’s 11th-hour instruction to the Senate to seek a deal followed toxic rhetoric from both sides. Reid, the senate majority leader, accused Boehner of operating a “dictatorship” in the house and putting his job as speaker – which hangs in the balance – ahead of the national interest.
Ideological polarisation over how to tackle the federal deficit – Democrats wish to raise taxes, Republicans wish to cut spending – lies at the heart of Washington’s gridlock.
With its Tea Party faction opposing even Republican-sponsored compromises, the GOP fears it will receive the most blame if the US falls off the cliff. However, economic crisis could also wreck Obama’s second term and his quest for a legacy.
If no Senate deal is reached the president said he would propose a scaled-down package to cushion the fiscal fall by extending tax cuts for the middle-class and maintaining unemployment benefits. “If an agreement isn’t reached in time between Senator Reid and Senator McConnell, then I will urge Senator Reid to bring to the floor a basic package for an up-or-down vote,” he said.
Obama said his plan to let taxes rise for families who earn more than $250,000 would win a majority vote in both chambers, but that does not seem certain. Republicans wish to raise that ceiling to spare wealthier families tax rises.
Senate leaders pledged to try to hammer out a proposal to present to their caucuses by Sunday. “Whatever we come up with is going to be imperfect,” said Reid. “Some people aren’t going to like it, some people will like it less. But that’s where we are. We have an obligation to do the best we can.”
McConnell, speaking late on Friday, said a deal was feasible. “I am hopeful and optimistic,” he said. Senator Chuck Schumer, a Democrat from New York, echoed that to NBC. “Sometimes it’s darkest before the dawn,” he said.
However, Senator Bob Corker, a Republican from Tennessee, was bleaker in an interview with CBS, saying the last-minute talks were merely cosmetic ploys to give the impression politicians were doing something. “This is a total dereliction of duty at every level. I’ve been very surprised that the president has not laid out a very specific plan to deal with this, but candidly Congress could have done the same. And I think the American people should be disgusted,” he said.
JPMorgan’s CEO thinks lawmakers will eventually reach a compromise, and that could spark ‘a booming economy in a few months.’
Read the rest here: Dimon: Solve fiscal cliff, U.S. economy will soar
One of the co-chairs of the deficit commission doesn’t expect compromise on the fiscal cliff: Congress is “totally confused.”
Originally posted here: Alan Simpson paints dire market outlook
President Obama and the House speaker both claim a mandate from voters, but each raised the possibility of compromise
President Barack Obama used the first weekly radio address of his second term Saturday to vow that he would stick to an election promise to raise tax contributions from the richest Americans to tackle the “fiscal cliff”.
Obama’s first order of business following Tuesday’s victory at the polls is to tackle a series of tax hikes and spending cuts that will be triggered in the new year if there is no wide-ranging deal with Congress on a deficit-trimming budget.
If such a deal fails, many experts are predicting the US economy could fall back into recession. But the Republican-controlled House of Representatives has said it will not countenance any tax rises as part of the agreement.
In his new address, Obama said that was not acceptable: “I refuse to accept any approach that isn’t balanced. I will not ask students or seniors or middle-class families to pay down the entire deficit while people making over $250,000 aren’t asked to pay a dime more in taxes.”
The president added that he believed this election victory over the Republican challenger Mitt Romney had given him a mandate to carry out his promise. “This was a central question in the election. And on Tuesday, we found out that the majority of Americans agree with my approach,” he said.
So far both sides – while sticking to their positions – have also tried to indicate that they are open to negotiations and compromise. Obama continued that line on Saturday by holding out the prospect of wide-ranging talks with his Republican opponents.
“We know there will be differences and disagreements in the months to come. That’s part of what makes our political system work,” he said. “Instead, you want cooperation. You want action. That’s what I plan to deliver in my second term, and I expect to find leaders from both parties willing to join me.”
Next week Obama will be meeting with top Republicans and Democratic leaders to begin the process of thrashing out a possible deal. He is also set to consult with business leaders and officials from organised labour.
Many business leaders have argued that the prospect of going over the fiscal cliff represents a nightmare scenario for America’s economic prospects.
Some have called for tax hikes to be part of any settlement. Before the election, 80 American business leaders, including Microsoft’s Steve Ballmer and JP Morgan’s Jamie Dimon, signed a letter calling for a balanced approach to tackling the budget deficit, including tax hikes and spending cuts.
On Friday, United Continental airline boss Jeff Smisek told CNBC that the fiscal cliff could have a potentially more disastrous impact on his business than superstorm Sandy. “It makes it difficult for us to operate,” Smisek said.
However, a political deal is far from guaranteed. The election left House Majority leader John Boehner firmly in control of the House of Representatives, along with its Tea Party-infused Republican caucus.
Many of those politicians are implacably opposed to any form of tax hike, and Boehner has also struck a strong tone, claiming that the election results that left his party in charge of the House also represent a mandate from the people.