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If a deal is not possible, it should become evident at Friday’s White House meeting. If that occurs, Obama and the leaders would leave the resolution to the next Congress to address in January.
Such a delay could unnerve the stock market, which performed erratically Thursday amid the developments in Washington. Economists say that if the tax increases are allowed to hit most Americans and if the spending cuts aren’t scaled back, the recovering but fragile economy could sustain a traumatizing shock.
But a sentiment is taking hold that despite a black eye to its image, Congress could weather the fiscal cliff without significant economic consequences if it acts decisively next month.
“Going over is likely because at this point both sides probably see a better deal on the other side of the cliff,” Jared Bernstein, Biden’s former economic adviser, wrote in a blog post Thursday.
By letting current tax cuts expire and rise, Bernstein and others say, Republicans would be voting to lower taxes next month, even if not for all taxpayers. Democrats — and Obama — would be in a stronger position to demand that taxpayers above the $250,000 threshold pay higher taxes, instead of the $400,000 threshold that Obama proposed in his latest offer to Boehner.
And the debate over spending cuts, including changes to politically sensitive entitlement programs such as Medicare, would have to start anew.
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