President Obama and House Speaker John Boehner are one step closer to reaching an agreement on the so-called fiscal cliff — the $600 billion in government spending cuts and tax increases that will affect all Americans in January. Over the weekend Boehner reportedly lowered his resistance to raising new revenue by agreeing to increase taxes on incomes over $1 million.
He also signaled that he would extend the debt limit for a year, angering Republicans who are opposed to raising the nation's borrowing limit. Boehner's latest overture in the tense fiscal cliff discussions has led many to believe a deal will get done before Dec. 31.
Obama, eager to resolve the looming fiscal crisis, made Boehner an offer Monday that cut his proposed $1.4 trillion in new revenue over 10 years to $1.2 trillion. The president has also agreed to allow the Bush-era tax cuts to cover more Americans: he would extend the expiring cuts to include household incomes of $400,000 from his original $250,000 annual income target.
A budget deficit reduction deal could also include deep spending reductions in Medicare and Medicaid, two programs that Democrats are loathe to touch.
Sydney Finkelstein, a professor of management at the Tuck School of Business at Dartmouth, calls Congress "dysfunctional" and says the "adults in the room" need to stand up and end the fiscal cliff uncertainty for good. Congressional leaders are like the management team at a major corporation, he explains, and their reckless and irresponsible behavior should make any shareholder want to sell the company stock as fast as possible.
Finkelstein acknowledges that this situation may be ideal on Wall Street but a wholly unrealistic one for the nation. Instead, Finkelstein recommends that Obama and Boehner remain flexible as the fiscal cliff talks drag on and he advises against the private, back-door deals that the two men are attempting.
The games the two parties are playing are "counterproductive" and the growing uncertainty gives both citizens and businesses "zero confidence" in policymakers' ability to govern the nation effectively, according to Finkelstein.
"Confidence is absolutely one of the key things the economy needs to grow," he says.
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