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Have We Already Plunged Over the Cliff?

In recent weeks, all eyes have been on Washington in hopes that Congress and President Obama would reach a deal to avoid sending the country over the fiscal cliff. Hopes were high, but with time running out it appears as though no deal will be reached, and the nation is indeed going to go over the cliff.

Economists are generally in agreement that the planned tax hikes coupled with scheduled budget cuts will send the nation into another recession unless some sort of deal was reached, but the divide between Republicans and Democrats appears to be too great to overcome.

Frustration has been growing, and today Democratic Senate Majority Leader Harry Reid took his frustrations out the Senate floor. Reid placed blame for the lack of a deal solely on the shoulders of the Republican Party, and in particular the Speaker of the House John Boehner. He stated that the Senate had acted weeks ago, but Boehner has been acting in a manner that shows he cares more about keeping his title as Speaker than he does about saving the country from the fiscal cliff.

Reid pointed out that the Democrat controlled Senate had already made a big concession to extend the Bush-era tax cuts on households making less than $250,000 a year, and urged Boehner to “take the escape hatch”.

Of course Boehner has a different view of the situation. He contends that House Republicans are not to blame, that it is actually the Senate that has failed to do what it needs to do to keep the country from going over the cliff. His claims come despite being unable to get enough votes last week to pass a measure to extend tax cuts on all households except those earnings over $1 million.

Democrats balked at the measure because it did not raise the amount of revenue they wanted, and Republicans did not vote in its favor because too many believe that taxes should remain intact for everyone.

As much as I had believed all along that a last minute deal would be reached, it does not appear to be the case. Democrats and Republicans are just too far apart and to make matters worse, House Republican leaders have told their members to go home, and not plan to come back until after the New Year unless the Senate makes the necessary concessions. With the severity of what is at stake, you would imagine that all our elected officials would be in Washington trying to work something out, but instead it appears as though Republicans have decided not to budge, and as a result see little reason to even try negotiating.

Republican leaders have insisted that President Obama and the Senate bring forth a measure that ensures there will be no tax hikes, and unless that occurs they will not bring their members back to Washington.

Not only does it seem as though a deal is going to be tough to reach, it appears as though House Republicans have decided to not even try. They have drawn a line in the sand, and no it is a big game of chicken to see which party will give in. Unfortunately for everyone, it does not appear as though either party is going to give, and the fiscal cliff is going to go from a possibility to a reality.

Michael Fowlkes

Michael Fowlkes is a financial writer who has been with the Fresh Brewed Media family since 2004. Over the course of his tenure with Fresh Brewed Media, he has worn many hats, including portfolio manager, options analyst, and writer. Michael received his undergraduate degree from Virginia Tech in Accounting and got his start in finance working as a stock trader for six years at Chase Investment Counsel in Charlottesville, Va.