Time for Plan C? Fiscal cliff solution stalls
U.S. Speaker of the House Rep. John Boehner (R-OH) leaves after his weekly news conference December 20, 2012 on Capitol Hill in Washington, D.C.
It was called "Plan B". It was a Republican effort to avoid some of the tax increases that are part of the fiscal cliff.
The White House had always planned to veto it, as Press Secretary Jay Carney detailed before the vote.
"The Republicans in the House have decided to run down an alley that has no exit," he said.
But Republicans didn't even get very far down the alley. In a Washington surprise, Plan B fell last night, after House Speaker John Boehner failed to muster the support in his own party to pass it. He sent Congress home for Christmas and said in a statement that it's now up to the Senate to work with the president to avoid the fiscal cliff.
"What we saw here was Republicans trying to take Plan B to the House, trying to get a measure through that would include tax hikes on those making over $1 million," says Tim Mak, a reporter with Politico. "And we realized that Republicans just couldn't get it through the House. And now we're at an even more desperate point here in the fiscal cliff."
Stock markets around the world are not pleased today.
"Many people -- particularly on financial markets -- are concerned about the possibility that the U.S. may tip over the fiscal cliff," says BBC business reporter Rob Young. "Because many analysts have predicted that if a deal does not materialize by the end of the December, if the United States does go into recession, they fear that will drag down the global economy as well."
So was this latest twist in the fiscal cliff negotiations expected?
"I wasn't all that surprised," says Tony Fratto, a partner at Hamilton Place Strategies. "I know that the speaker was trying to throw a bit of a Hail Mary pass here to get something done quickly."
We will very likely end up going over the fiscal cliff, Fratto adds.
"There are two ways that this can go: The Republicans could -- under a lot of pressure in the coming week -- essentially give in and capitulate to the president's position. Or they could go back into their trenches," he predicts. "But my bet is that we go into the new year, because that's where the votes will be on the Republican side."
Mark Zandi, chief economist with Moody's Analytics agrees.
"My sense is that this will probably have to go into next year and we'll probably have to see some turmoil in the financial markets -- we're getting a whiff of that today in the stock market -- to generate the political will necessary to get these folks to sign on the dotted line."
Zandi adds that going over the "fiscal cliff" for a few days in this manner will not have a big impact on individual Americans.