Commodity Trade Mantra

Hopes on Fiscal Cliff Deal Rise on Offers, Counter Offers & More to Come

Hopes on Fiscal Cliff Deal Rise

Hopes on Fiscal Cliff Deal Rise on Offers, Counter Offers & More to Come

The looming Fiscal Cliff horror seems to have triggered the Democrats & the Republicans into hyper mode as they seek to iron out differences in a last minute effort to stop automatic tax hikes and spending cuts from going into effect early next year. The rapid developments Monday evening put a Fiscal Cliff deal realistically within reach, anytime soon. Analysts have warned that that abrupt shock could knock the US Economy back into recession. Obama and Boehner met for 45 minutes yesterday at the White House for the third time in nine days in an attempt to prevent the so-called Fiscal Cliff & are still far apart on where to draw the line on tax rates, how to address the debt limit and whether stimulus spending should be included in a budget deal. In its most dramatic change in position yet, a major counteroffer (Not necessarily a Final Fiscal Cliff Offer) on the Fiscal Cliff deal by President Barack Obama moves the White House and Congressional Republicans closer to resolving the standoff. Obama is seeking $1.2 trillion from higher tax revenues, including increased rates on those earning more than $400,000 a year, up from the earlier $250,000. Obama is expected to agree to $1.22 trillion in spending reductions, including some cuts achieved by changing the way cost of living adjustments are made to Social Security retirement benefits and other programs. It would change the inflation measure used to calculate Social Security benefit increases. The Fiscal Cliff offer asks for Congress to increase the national borrowing ceiling for two years using a parliamentary procedure proposed by Senate Republican leader Mitch McConnell. President Obama’s latest offer shows him willing to link Social Security benefit increases to the chained consumer price index, a step that would lead to lower payments, something that few of his supporters had sought to protect. Obama also moved closer to Boehner on the proportion of a ten-year deficit reduction package that should come from increased revenue, as opposed to cuts in government spending. The Fiscal Cliff offer included $1.3 trillion in revenue and $930 billion in spending cuts. That calculation doesn’t count $290 billion in lower interest payments as part of the spending cut. Interest savings are a byproduct of tax and spending decisions.

Cliff Hanger Proposals:

Obama’s Fiscal Cliff offer would set the top tax rates on dividends and capital gains at 20%, the person said. Combined with tax increases from the 2010 health care law scheduled to take effect in January, the top rates would be 23.8%. Obama would return the estate tax to 2009 parameters, with a $3.5 million per-person exemption and a 45% top rate. The dividend proposal matches the bill Senate Democrats passed in May and would raise less money than Obama’s budget, which called for taxing dividends as ordinary income. The estate proposal is less generous than the parameters backed by many Senate Democrats, who would extend the $5.12 million exemption and 35% top rate. Obama’s offer includes several details that hadn’t previously been publicly under consideration. His proposal would end three recurring debates that occur in Congress over expiring provisions. Obama would permanently extend an annual “patch” that prevents expansion of the reach of the alternative minimum tax. He would end a scheduled payment cut to doctors under Medicare. Also, he would permanently extend dozens of tax breaks that routinely expire, such as the research and development tax credit and the ability to deduct state and local sales taxes. His plan would achieve $400 billion in savings from health programs, $200 billion from other so-called mandatory spending programs and another $200 billion from other programs, half in defense. About $130 billion of the spending savings would come from switching the way that annual inflation increases for Social Security benefits are calculated. Obama’s offer would include protections for the most vulnerable recipients, reported Bloomberg.

Fiscal Cliff offer is flawed but positive: 

Aides to House of Representatives Speaker John Boehner said on Monday the latest White House offer on resolving the Fiscal Cliff impasse is flawed but moves negotiations in a positive direction. “Any movement away from the unrealistic offers the President has made previously is a step in the right direction, but a proposal that includes $1.3 trillion in revenue for only $930 billion in spending cuts cannot be considered balanced,” said Brendan Buck, a Boehner spokesman. – More on Reuters. Obama is now willing to accept a revenue figure of $1.2 trillion, down from his previous $1.4 trillion proposal. Boehner’s latest proposal calls for $1 trillion in new tax revenue, which would come from raising rates and limiting deductions that the wealthiest can take. Boehner faces a crucial test on Tuesday morning when he is expected to brief his party’s lawmakers in the Republican-controlled House. He is not expected to bring any deal up for a vote unless a majority of the 241 House Republicans support it. Republicans want substantial spending cuts in return for increased tax revenue, but any Fiscal Cliff Proposal to trim popular benefit programs like the Medicare health insurance plan for seniors will face fierce resistance from liberal Democrats, whose votes will be needed to get a deal passed. Obama could also face strong opposition from Democrats if he agrees to Boehner’s proposal to slow the growth of Social Security benefits by changing the way the cost-of-living increases are measured against inflation, an approach that could save $200 billion over 10 years. Obama also wants to head off another confrontation over the US Debt Limit, which will need to be raised in the coming months. Republicans insist that any increase in the government’s $16.4 trillion borrowing authority must be paired with an equal reduction in spending. Markets can reasonably expect a deal on the Fiscal Cliff on Wednesday at the earliest.

Please check back for new articles and updates at Commoditytrademantra.com



request your views on the above article

Comments are closed.

For More details on Trade & High Accuracy Trading Tips and ideas - Subscribe to our Trade Advisory Plans. : Moneyline

follow us

markets snapshot


Market Quotes are powered by Investing.com

live commodity prices


Commodities are powered by Investing.com India

our latest tweets

follow us on facebook