The Fiscal Cliff: Is an 11th Hour Solution All That’s Left?

Plan B would have renewed the Bush tax cuts for every American except those earning more than $1 million per year. At that income and above, the tax cuts would have expired and reverted back to where they were under the Clinton administration. But Boehner was unable to gather the necessary support from House Republicans to pass his measure, and the vote was cancelled.

“Passing Plan B the other night would not have changed the outcome,” Representative Mick Mulvaney (R-South Carolina) told CNN. “We were going to go over the cliff then, we are going to go over the cliff now. You cannot negotiate with someone who does not want to negotiate.”

Republicans offered two primary reasons for not supporting the measure: the tax increase, and the lack of satisfying spending cuts. Mulvaney is referring to the President, who is accused of not offering reasonable cuts to entitlements. As it stands, Republicans and Democrats disagree on exactly how much in spending cuts are on the table. The White House’s current offer is about $930 billion, or $850 billion net after new spending. Republicans are seeking as much as $1.35 trillion.

Complicating the issue is not just how much spending is cut, but where. The GOP would like to see healthcare costs reduced, while some Democrats have pointed at the defense budget.

As it stands, the markets are reacting cautiously, preparing for what could be a highly volatile new year. Boehner’s failed play puts the ball in the Democratic court, where Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell bear much of the responsibility. While an elegant, comprehensive solution looks like a fiction at this point, Congress is infamous for its 11th-hour decision making.

What we can hope to see when leaders return to Washington on Thursday is an extension of the Bush tax cuts for the majority of Americans, and an austerity plan that replaces the one currently scheduled to take effect.

Don’t Miss: The Fiscal Cliff: Don’t Panic, It’s Only Improbable.