Skip to main content

You are here

Advertisement

Cliff Diving Now Looks More Likely

By Brian Graff, NAPA Executive Director/CEO

As the holiday approaches, I wish I had better news, but I'm afraid I do not. As you have likely heard, on Dec. 20 the Republican leadership withdrew its so-called “Plan B” alternative, which would have extended tax rates for those earning less than $1 million. Enough conservatives balked at the idea, and there was no Democratic support for the measure, so it would not have passed.

Let me cut to the chase: The likelihood of us going over the cliff has increased dramatically. Here’s why. Right now there appear to be only three scenarios that would avoid the cliff:

1. The president and the Democrats in the Senate agree to something that the House Republican caucus could agree with. But given that House Republicans would not even accept their leadership’s Plan B alternative, this seems to be an impossibility.

2) House Speaker Boehner would have to propose a bill, like the Democratic Senate-passed bill extending rates for incomes below $250,000, that would get Democratic support and enough Republican support to pass. This could violate a well-established political principle that a House Speaker never allows a vote on a bill that does not have the majority support of his own caucus. Given that — and the distinct possibility that Boehner could lose his speakership over such a move — this seems highly unlikely.

3) Senate Democrats and Republicans (principally Sens. Reid and McConnell) get together and fashion a bipartisan compromise that will pass the Senate and satisfy at least a majority of the House Republicans. Speaker Boehner could then introduce the compromise bill in the House, where it would pass. In my view, this seems to be the last viable hope for avoiding the cliff. It’s certainly conceivable, given the fact that the sides are not too far apart. However, since the Senate is in recess until after Christmas, time is running precariously short.

Given this, it's my assessment that the odds are now better than 50-50 that we will be going over the cliff. Please keep in mind that like most everything here in DC, going over the cliff is not a permanent proposition and the new Congress could fix many things when it convenes in January. How the markets respond to all of this, of course, remains to be seen.

Regards and Happy Holidays,

Brian Graff
ASPPA/NAPA CEO

Advertisement