Fixing the Debt: Update on U.S. Fiscal Cliff Crisis (8th Edition) - December 31, 2012

Explore:  Fiscal Cliff


  • An agreement has been reached between the White House and Senate Republicans, but how the House handles it may depend on the Senate vote dynamic.  Vice President Biden briefed the Senate Democratic caucus at 9:15 this evening on the state of play, widely viewed as a necessary step to ensure their buy in to a deal.  Senate sources say they will likely vote on an agreement tonight, but the vote could still slip to tomorrow.
  • The Senate Republican caucus meeting late this afternoon generally went well with most agreeing that the deal could be a lot worse, but also reserving judgment on how they will vote until they see final legislative details. 
  • One of the last pieces of the agreement, regarding how to pay for a likely two-month delay in the spending sequester, is coming into greater focus.  The roughly $24 billion is believed to be paid for as follows:
    • A Roth IRA provision that raises around $12 billion;
    • Discretionary spending cuts.  ($10 billion); and
    • Some small mandatory spending reductions ($2 billion).
  • House Republicans have not decided how to handle the legislation after it is passed by the Senate.  A lot may depend on what kind of vote it receives out of the Senate. 
  • Under any scenario, it will take a lot of House Democratic votes to pass.  Therefore, both Speaker Boehner and Minority Leader Pelosi will have to brief their conferences and gauge reaction before putting a bill on the floor.  So, the earliest House action would probably be later tomorrow.


  • Although by and large it is expected that this negotiated deal will be pass the Senate tonight, it is notable that some Members from both sides have spoken out against the deal, signaling the tough sell that may be ahead, especially in the House.  
  • Senator Mary Landrieu (D-LA) has expressed concern that current deal as configured would not actually reduce the deficit because of a permanent extension of some measures such as the AMT.  A permanent patch for the AMT scores in the range of $865 billion/10 years. 
  • Senator Tom Harkin (D-IA) expressed disappointment that Democrats have increased the income threshold from $250,000 up to $450,000, while Representative John Fleming (R-LA) said he could not vote for the deal because it does not cut spending, and Representative Jim Jordan (R-OH) still remains opposed.  Senator Rand Paul (R-KY) stated this evening that he believes the agreement will pass the Senate on a bipartisan vote, though he will vote against it.

We will keep you posted on developments as events warrant in the coming hours.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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