How Will the Fiscal Cliff Impact States?

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Last week, fiscal cliff negotiations between the Republican-controlled House of Representatives and the White House ended once again in a stalemate. Yet President Obama is forging ahead with his plan to meet a partisan delegation of governors on Tuesday to determine the impact deficit reduction measures will have on their state budgets.

The fiscal cliff — a combination of expiring Bush-era tax cuts and automatic spending cuts scheduled for January 1 — is expected to increase unemployment levels regionally. According to the Pew Center on the States, federal grants given to states account for one-third of their revenues, and so spending cuts will significantly decrease state budgets.

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Obama will meet governors who hold leadership positions in the National Governors Association, including Democrats Jack Markell of Delaware, Mark Dayton of Minnesota, and Mike Beebe of Arkansas and Republicans Gary Herbert of Utah, Scott Walker of Wisconsin and Mary Fallin of Oklahoma.

However, with Republicans and Democrats at odds over the issue, the meeting may have limited results. As Reuters reported, “these NGA leaders may leave frustrated, as have numerous other delegations of civic, union and business leaders trooping to Washington in the past few months.”

In their first formal proposal, Republicans presented a plan to avoid the cliff that called for steep spending cuts. The White House dismissed the plan within an hour; the same treatment Republicans gave Obama’s deficit reduction plan. But a bargain can still be reached, according to Reuters. It’s “just a Kabuki theater you go through,” said Erskine Bowles during an interview on PBS’s “Newshour” on Monday. Bowles co-chaired Obama’s National Commission on Fiscal Responsibility and Reform in 2010, which was widely praised but never adopted.

The theater to which Bowles referred will likely continue this week as Democrats make an effort to force a vote on tax hikes on the wealthy.

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