Fiscal Cliff: Last Minute Deal or Retroactive Fix?

The fiscal cliff is just days away, and with no immediate rescue in sight, the country may be about to fall into another recession. A meeting Friday between President Obama and congressional leaders could lead to a last minute resolution or validate concerns that a resolution won’t be found in time.

One of the clinchers for the deal between Obama and House Republicans is the tax rate for high-income households. While Obama had previously offered to only raise taxes for households earning over $400,000 a year, a Senate Democratic aide doesn’t believe he will make that same offer again, as the threshold now seems focused on households earning over $250,000 a year, according to Reuters.

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The Republican side mostly wants to keep lower tax rates for all households, and is unlikely to waver unless spending cuts are agreed on for entitlement programs like Medicare. The stand-off seems not to have moved very far from where it was a month ago when the President and congressional leaders last met.

Some economists are not hopeful for the government to reach a resolution in time. The Dow Jones industrial average dropped nearly half a percentage point Friday.

Some others are not so concerned about the fiscal cliff taking effect January 1. In fact, some members of congress are looking at coming up with a retroactive fix after December 31 to avoid the spending cuts and tax hikes. Whether a retroactive fix will be needed could hinge on the result of Friday’s meeting, but one Republican Senator from South Carolina, Linsey Graham, thinks the meeting will just be “political theater.”

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