Recent pronunciations from Congressional leaders and White House officials seem to suggest that, for now, negotiations between Democrats and Republicans are breaking down. According to various news reports, the usual sticking points between the two parties – spending and taxes – are rearing their ugly heads, but this time the tables have turned following President Barack Obama's November electoral victory.
Those following the debate will remember the end of last week, when the GOP rebuffed Treasury Secretary Timothy Geithner's attempts to define the meeting by President Obama's terms, which included higher tax rates for the wealthy and unilateral powers to raise the national debt limit.
This Sunday, the secretary made the rounds of the Sunday talk shows, including CNN's State of the Nation, where he reiterated that Republicans would have to cut a deal that featured some tax hikes.
"There's not going to be an agreement without rates going up," Geithner said in the interview. "If they are going to force higher rates on virtually all Americans because they're unwilling to let tax rates go up on 2 percent of Americans, then, I mean that's the choice they're going to have to make."
ABC News reported on December 3 that unnamed GOP elected officials knew about preparations for a scenario in which a deal became impossible or unworkable. In that case, a so-called "Doomsday Plan" would be approved that would hike upper tax rates but provide nothing in terms of fiscal stimulus, unemployment benefits or a debt ceiling increase. This agreement would set the stage for further negotiations in January, a debate that would surely focus on spending cuts and the nation's borrowing limit.
A breakdown in negotiations is bad for everyone, including those who currently trade in U.S. stock or bond markets. Because a failure to come up with a comprehensive fiscal cliff deal could cause volatility and losses in those investment exchanges, it might be a good time for investors to consider alternative methods, including cash flow real estate. To learn more about this dependable and stable form of investment, visit GreatWealthStrategies.com to receive a "Free Game Plan Report."