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BREAKING NEWS: The Federal Government “Goes Over the Fiscal Cliff,” with Negotiations Set to Resume After New Year’s Day

December 31, 2012
by Mark Hagland
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Congress and the White House scramble to avert the impact of the coming budget sequestration

Even as Vice President Joe Biden and Senate Minority Leader Mitch McConnell reached an agreement Monday afternoon, Dec. 31, on a tentative deal to stave off large tax increases beginning Tuesday, Jan. 1, they remained at an impasse on whether and how to prevent $110 billion in across-the-board federal spending cuts—among them Medicare reimbursement cuts, according to media reports Monday. As a result, the country will “go over the fiscal cliff,” to use a phrase initially coined by Federal Reserve Chairman Ben Bernanke to describe succinctly a federal budget sequestration process involving hundreds of billions of dollars in increases in tax rates, combined with hundreds of billions of dollars in federal spending cuts, all of which begin Jan. 1.

“Today it appears that an agreement to prevent this New Year’s tax hike is within sight, but it is not done,” President Barack Obama said early Monday afternoon in an appearance at the Eisenhower Executive Office Building, next door to the White House. “There are still issues left to resolve, but weare hopeful that Congress can get it done. But it is not done.”

The New York Times reported in mid-afternoon Monday that “Republicans responded to the President’s speech angrily, accusing him of ‘moving the goal posts’ just when a deal was in reach.” In the Times report, Jonathan Weisman added, of Republicans, that “They said that they knew that the two sides still had to agree on how to suspend the automatic spending cuts, but that they generally agreed that such a suspension would be offset, at least partially, by spending cuts elsewhere. Instead, the President said any deal to turn off the so-called sequester had to be financed by tax increases and spending cuts in concert.”

Meanwhile, reported at 4:01 p.m. eastern time on Monday that business would be wrapped up in Congress by 6:30 p.m. eastern time, meaning that the House of Representatives would not vote Monday on any potential fiscal cliff deal.

Commenting on that news, CNN quoted Sen. Lindsey Graham (R-SC) as telling Wolf Blitzer, “I think it shows the dysfunction of the political system.”

Among other impacts of the budget sequestration that will kick in beginning on Jan. 1 will be an across-the-board 2-percent reimbursement cuts for Medicare providers. In addition, congressional and White House negotiators are trying to work out some sort of continuation of the so-called “doc fix,” in order to avert a separate 26.5 percent Medicare payment cut to physicians, the result of a long-term inability to resolve issues around the sustainable growth rate (SGR) under Medicare.

Though by late afternoon it had become certain that the government would “go over the fiscal cliff,” all sides were preparing for intense negotiations to resume on Jan. 2.