Even if U.S. lawmakers prevent the worst of the so-called fiscal cliff, the brinksmanship in Washington over taxes and spending is likely to continue damaging the fragile economy well into 2013.
A months-long political standoff over fiscal policy has already taken its toll, adding uncertainty that has discouraged consumers from spending and businesses from hiring and investing.
The squabbling seems sure to persist even if the House of Representatives goes along with a partial fix passed by the Senate in the early hours of Jan. 1. Under that plan, taxes will rise on individual incomes over $400,000 and household incomes over $450,000 and on the portion of estates that exceeds $5 million. The House is expected to vote Tuesday or Wednesday.
But lawmakers appear to have postponed tough decisions on government spending, giving themselves a reprieve from cuts that were scheduled to begin taking effect automatically Jan. 1. That just sets the stage for more hard-bargaining later.Continue reading →