The compromise, which first was agreed by Senate in early Tuesday morning, has come not without some last minute agitated negotiation disputes, in which Republicans wanted to challenge the approved senate-bill by sending it back for revision demanding additional spending cuts, with reports initially suggesting that the House Republicans would be adjourning any decision until Wednesday.
Pending the signature of President Obama, expected to be done shortly, the US officially avoids that millions of citizens suffer tax hikes and spending reductions, which would have brought the U.S. economy into recession according to economists' projections. Worth not forgetting though, is that still plentiful of unresolved pressing issues remain, with the most immediate being the need to raise the federal borrowing limit, with the deadline over 2 month from now.
Nevertheless, Richard Lewis, Head of Global Equities at Fidelity Worldwide Investment sums the deal up as “deeply unimpressive” because in his opinion the questions of the debt ceiling and spending cuts have been staved offjust temporarily.
The analyst comments: “There is no financial market pressure on politicians to do any better due to the continued unprecedented ease from the US Federal Reserve, which just before Christmas announced a rise in their scheduled rate of asset purchases from $40bn per month to $85bn per month until further notice. So US asset prices rally on the easy fiscal and easy money policy mix. We are unlikely to see much change in behaviour unless or until serious US$ weakness calls time on the Washington shenanigans."
House Republicans give up; will vote on Senate-passed bill in 9pm ET
It appears as though House Republicans have desisted their efforts to demand additional spending cuts to the fiscal cliff bill approved early Tuesday morning by the Senate, and now pending the final acceptance through the House of Representatives. Will the circus be finally edging closer to its end? CNN is even putting out the following headline: "House will vote on Senate-passed bill in 9pm ET hour". The story is still developing.
House Republican leaders considering a two-bill strategy
Following reports that the House Republicans are adjourning until Wednesday a decision over the fiscal cliff bill, GOP House leaders - according to Joe Weisenthal and Grace Wyler at Business Insider - "are now suggesting that they plan to amend the bill to include spending cuts, an outcome that will almost certainly be unpalatable to Democrats in the Senate."
The new deadline for the fiscal cliff is Thursday, Business Insider notes, time when the 112th Congress officially ends. If no deal is reached by then, markets may face sharp sell-offs.
There is talk that House Republican leaders are considering a two-bill strategy, in which, according to Business Insider, "GOP leaders will whip votes for an amendment to add spending cuts to the bill the Senate passed early Tuesday, and if they cannot get the 218 votes they need to pass the amendment, they have said they will hold an up-down vote on the Senate legislation."
US senate adjourns until Wednesday decision over fiscal cliff bill
The US senate has adjourned until Wednesday morning a decision over the fiscal cliff bill, Senate Majority Leader Harry Reid, D-Nevada, said. These comments have triggered some USD buying across the board in Asia.
Despite the headlines, the Australian market has opened on a strong footing, suggesting that investors in the far east are still comfortable holding and adding longs, with the fiscal cliff deal through House being more "a matter of how and when, not if", notes Brooke Corte, Sky News Australia business presenter.
Republicans oppose approval of Senate's fiscal cliff bill through the House
In the wake of a temporary agreement to avert the fiscal cliff by the Senate on 31-12-2012, and ahead of the Asian market opening, it looks like the initial compromise between Democrats and Republicans to get approval from the House of Represantives will be harder than previously thought, as Republicans demand further amendments on spending cuts.
According to Politico correspondents Jake Sherman and Carrie Budoff Brown, the Senate compromise "could be in jeopardy, as House Republicans seem nearly certain to tweak the legislation and send it back to the Senate because it doesn’t contain sufficient spending cuts." Opposition to the current form of the bill by Republicans — which would extend tax rates for families making less than $450,000 — is still overwhelming, sources inside the room said, Jake and Carrie note.
A few hours ago, Republican Eric Cantor reportedly opposed the Senate's fiscal cliff bill, with the House GOP now expected to meet in the next few hours to decide what to do next, the NBC reports through CNBC.
Tentative fiscal cliff deal close, Obama to speak
Just hours ahead the US fiscal cliff, Reuters has reported a tentative deal between Democrats and Republicans citing a ‘source familiar with talks’. President Obama is due to make a statement at 18:30GMT.
According to media reports, emerging cliff deal would raises taxes on individuals earning more than $400,000, and for families earning more than $450,000.
The agreement would also include permanent alternative minimum tax fix and extend unemployment insurance for a year. The Estate tax would be hiked to 40% from 35% while there will be no new spending cuts.
The sticking points in deal are the sequester delay, which could be 60-90 days, and the potential need to find $30 billion in spending cuts to pay for the medicare 'docfix'.
US Congress battles to strike a last-minute deal to avoid fiscal cliff
The US Congress has called a last minute meeting to try to avoid the "fiscal cliff", that would trigger tax hikes and spending cuts worth $600,000 million set to begin in 2013.
The main sticking point between Republicans and Democrats remained whether to extend existing tax rates for everyone, as Republicans want, or just for income below $250,000 to $400,000, as Democrats have proposed.
According to people familiar with the talks, Republicans and Democrats were narrowing the threshold for tax increases to between $400,000 and $500,000 in annual income.
Democrats relent in hopes of striking a deal before the clock strikes midnight
Vice President Biden and Senate Minority Leader Mitch McConnell (R-Ky.) continued urgent talks Monday over a deal to avoid the “fiscal cliff” after Democrats offered several significant concessions on taxes, including a proposal to raise rates only on earnings over $450,000 a year.
With a New Year’s Eve deadline hours away, Democrats abandoned their earlier demand to raise tax rates on household income over $250,000 a year. President Obama had vowed repeatedly during his reelection campaign to allow tax cuts to expire for incomes over that level.
Democrats also relented on the politically sensitive issue of the estate tax, according to a detailed account of the Democratic offer obtained by The Washington Post. They promised instead to hold a vote in the Senate that would guarantee that taxes on inherited estates remain at their current low levels, a key GOP demand. As of Monday morning, McConnell’s office reported that talks continued between the Republican leader and Biden and expressed some hope of reaching a deal.
McConnell was holding out to set the income threshold for tax increases even higher, at $550,000, according to people close to the talks in both parties. And he was protesting a Democratic proposal to raise taxes on investment profits for households with income above $250,000.
The two sides were also sharply at odds over automatic spending cuts set to decimate budgets at the Pentagon and other federal agencies next month. Democrats were seeking to delay the cuts, known as the “sequester,” until 2015, without identifying other savings to compensate. They were also pressing to extend unemployment benefits, farm subsidies and Medicare payments to doctors, again without offsetting cuts as Republicans demand.
“The Leader and the VP continued their discussion late into the evening and will continue to work toward a solution,” Don Stewart, McConnell’s spokesman, wrote in a statement Monday.