Last Moment Fiscal Cliff Deal keeps US floating in 2013
Fiscal Cliff is better avoided, though there are many people & many reasons that people don’t like the proposal. The White House reached a last minute bipartisan budget deal with Senate Republicans to avert the feared Fiscal Cliff. Vice President Joe Biden came to the Capitol to pitch it to Democrats with tax increases for almost every U.S. worker set to take effect in a few hours. Biden negotiated an agreement with Senate Minority Leader Mitch McConnell to increase taxes on top earners, extend expanded Unemployment benefits and prevent automatic spending cuts from taking effect for two months. Even if a Fiscal Cliff deal is reached and clears both chambers of Congress in coming days, it would be more limited than what Obama and leaders of both parties sought. It also would set up another fight early in 2013 over the budget and the Debt Ceiling. Some Senate Democrats expressed reservations about the accord, which would avert the so-called Fiscal Cliff. The Senate proposal would put off the cuts for two months and keep the expiring Bush-era tax cuts for individuals earning less than $400,000 or couples earning less than $450,000. President Barack Obama has long demanded that the threshold be set at $250,000. Tax rates on income above those levels would go back to the Clinton-era rate of 39.6%, up from the current 35%, and itemized deductions would be capped at $250,000 for individuals and $300,000 for couples. That would generate an estimated $600 billion in additional revenue over 10 years. Taxes on inherited estates will go up to 40% from 35%, but the exemption will be indexed to rise with inflation. Republicans are pushing for savings in the Medicare and Social Security healthcare and retirement programs and threatening to block a increase in the debt limit – which caps how much debt the federal government can hold – in February unless they get their way.
Senate Majority Leader Harry Reid, the Nevada Democrat who controls the chamber’s schedule, told Obama that he would give Biden an opportunity to discuss the deal with the caucus, according to a senior Democratic aide. Reid told the president he would back the agreement if his caucus did. No deal can reach the floor without Reid’s approval. As New Year’s Day approached, members were thankful that financial markets were closed, giving them a second chance to return on Tuesday to try to blunt the worst effects of the fiscal mess. The House has convened a session for Tuesday at noon though it is a holiday. Economists warn the one-two punch of tax increases and spending cuts, known as “sequestration,” could push the US Economy back into recession and drive unemployment back over 9% by the end of 2013. Obama had chided lawmakers for their last-minute scramble earlier Monday, hitting a nerve among several Republicans in the Senate, reported CNN. Taxpayers and investors won’t see immediate effects of the changes, which would accumulate over a matter of months. By acting early in 2013, Congress could reverse the tax and spending changes.
THE ECONOMY & THE FISCAL CLIFF
Statement from the President, as released by the White House:
“Leaders from both parties in the Senate came together to reach an agreement that passed with overwhelming bipartisan support today that protects 98 percent of Americans and 97 percent of small business owners from a middle class tax hike. While neither Democrats nor Republicans got everything they wanted, this agreement is the right thing to do for our country and the House should pass it without delay.
This agreement will also grow the economy and shrink our deficits in a balanced way – by investing in our middle class, and by asking the wealthy to pay a little more.
What’s more, today’s agreement builds on previous efforts to reduce our deficits. Last year, I worked with Democrats and Republicans to cut spending by more than $1 trillion. Tonight’s agreement does even more by asking millionaires and billionaires to begin to pay their fair share for the first time in twenty years. As promised, that increase will be immediate, and it will be permanent.
There’s more work to do to reduce our deficits, and I’m willing to do it. But tonight’s agreement ensures that, going forward, we will continue to reduce the deficit through a combination of new spending cuts and new revenues from the wealthiest Americans. And as we address our ongoing fiscal challenges, I will continue to fight every day on behalf of the middle class and all those fighting to get into the middle class to forge an economy that grows from the middle out, not from the top down.”
Fiscal Cliff Deal sends Markets & Gold up:
Comex Gold Prices moved up following the Fiscal Cliff deal News that the Obama administration and US lawmakers were apparently closing in on. The Stock Markets seemed to have again switched to Risk On mode. Commodity Markets also got a boost from a better-than-expected Chinese manufacturing data released yesterday. The HSBC purchasing managers index rose to 51.5 in December, which is a 19-month high and was up from 50.5 seen in November. China is seen as the Key Growth engine & an improvement in Chinese Economy will have a positive effect on raw commodity markets as China is also a major importer & consumer of Base Metals.
CME Group lowers Gold Trading Margins:
Announced last Friday, the initial margin for the 100-ounce Gold Futures traded on the Comex division of the New York Mercantile Exchange will decline to $6,600 from $7,425 currently, coming into effect from Wednesday, 2nd Jan 2013. The “maintenance” margin for existing speculative positions, as well as all hedge positions, will fall to $6,000 from $6,750. This move may add push to Gold Prices which have taken a hammering in the last weeks of 2012 on the Fiscal Cliff fears.
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