Washington is again focusing on the so-called “fiscal cliff” now that the election is out of the way, and there is strong evidence of a “grand bargain” being agreed to by Congress and the White House by year-end in order to avert a dramatic impact on the economy.
President Obama signaled support for a compromise in accepting Mitt Romney’s concession early Wednesday, and on Wednesday, both Senate and House leaders made statements implying that talks are underway.
The issue boils down to the fact that, barring action, $668 billion in total spending cuts and tax increases will take effect Jan. 1, constituting 4% of total gross domestic product.
Also critical is that estate-tax policy will revert to 2001 levels if there is no action. If Congress fails to act, 14.7 million U.S. households would have a potential estate tax liability, according to LIMRA.
The consensus of congressional staffers is that there will be a one-year deal to avoid the huge year-end impact.
The sources say that this deal would include an agreed-upon deficit reduction number, including an agreement for tax reform that brings in revenues.
One industry lobbyist says part of the package would preserve all or some of the Bush-era tax cuts, part of it presumably would deal with raising the debt ceiling, and part could address payroll-tax relief and the 29% decline in payments to physicians as of year-end—the so-called “doc fix.”