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The political soap opera currently taking place in Washington D.C. offered a new twist late Thursday. Due to a lack of support among his own party, Republican House Speaker John Boehner canceled a vote on his own plan to dodge a tax increase for the majority of Americans.
The bill, often referred to as “Plan B,” was the newest plot line in the fiscal cliff episode. It would have allowed the Bush-era tax cuts to expire on people with incomes above $1 million per year, while extending them for everyone else. After pulling the bill without a vote, Boehner then dismissed the House until after Christmas, raising doubt that the two political parties will be able to reach some kind of a deal before the beginning of January.
Financial markets have been on edge for weeks over the fiscal cliff, a combination of spending cuts and tax increase scheduled to take place in less than two weeks. Several chief executive officers from companies such as Wal-Mart (NYSE:WMT) and General Electric (NYSE:GE) have recently noted a slowdown in business, citing concerns over the fiscal cliff among customers.
As one might expect, stock futures plunged when the Plan B measure was canceled and gridlock worries spiked. The S&P 500 (NYSEARCA:SPY) closed at 1,443 on Thursday, but index futures in extended hours crashed to about 1,391, as seen in the chart above. The Dow Jones Industrial Average (NYSEARCA:DIA) and Nasdaq (NASDAQ:QQQ) also suffered mini flash crashes of their own. In early Friday trading, the S&P 500 traded near 1,418.
In a statement after a meeting with House Republicans, Boehner writes, “The House did not take up the tax measure today because it did not have sufficient support from our members to pass. Now it is up to the president to work with Senator Reid on legislation to avert the fiscal cliff.”
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