Market Drops As GOP Rejects Obama's "Uncompromising" Fiscal Cliff Offer
Markets sold off earlier today when Boehner commented that "no substantive progress had been made" in the last two weeks, only to recover quite rapidly. The 'rejection' is now in full context as the WSJ has just reported the terms have not changed (or compromised) at all since we first discussed them two weeks ago. A $1.6tn tax increase (upfront), $50 billion economic stimulus, and most importantly (we suspect guided by the miscreant hand of Geithner) the removal of the need for congressional approval to raise the debt ceiling. Overnight futures are down 5-6 points pushing towards Boehner's intraday lows. This should throw a little light on exactly where the negotiations stand (nowhere) and how willing each party is to change and bring hope to the table for compromise (not at all). With DC this far apart still, the game for the next few weeks is not to solve the fiscal cliff but to avoid getting the blame for the cliff-dive.
We can't help but feel like this being Geithner's pet project that a) it is doomed, and b) the angle is all about the debt ceiling. He has already publily commented that we would be better off without that 'check and balance' - but of course in reality all that means is that the nation is free to spend at will theoretically (as if there were a limit now). Perhaps it is a subtle signal that (as we have pointed out) the debt ceiling debate is actually even more important than the fiscal cliff and maybe (just maybe) Timmy G has run out of deferred pension tricks up his sleeve to cover the gap.
President Barack Obama made an opening bid in budget talks with Republicans that calls for a $1.6 trillion tax increase, a $50 billion economic-stimulus program and new power to raise the federal debt limit without congressional approval, a broad set of demands Republicans viewed as a step back in talks to avoid looming tax increases and spending cuts.
The proposal, offered by Treasury Secretary Timothy Geithner as he made a round of meetings with congressional leaders in the Capitol Thursday, calls for increasing tax rates on incomes over $250,000, a one-year postponement of looming spending cuts in defense and domestic programs, and some $400 billion in savings over 10 years from Medicare and other entitlement programs.
The details of the proposal were described by congressional GOP officials. Earlier in the day, after GOP leaders met with Mr. Geithner, they made plain they didn't like what they heard.
"No substantive progress has been made in the talks between the White House and the House over the last two weeks," said House Speaker John Boehner (R., Ohio), who also spoke to Mr. Obama on the telephone Wednesday night.
The White House offer in some sense amounts to a formal start of the negotiations, which could take many twists and turns before any possible deal is consummated. The White House didn't have an immediate comment.
Mr. Boehner's tone was a change from earlier this week when he said he was optimistic a compromise could be reached...
"All eyes are on the White House, the country doesn't need a victory lap, it needs leadership," Mr. Boehner said at a news conference in the Capitol. ...
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