With the Republican House Conference imploding over Speaker
Boehner’s (R-OH) Plan B bill (allow taxes hikes on incomes over $1 million) the
likelihood of going over the Fiscal Cliff at year end increases dramatically.
One scenario for averting the Fiscal
Cliff before year end requires
the Senate to pass a bill that can then be sent to the House for Boehner to
consider scheduling for a vote. To get there involves a lot of moving parts. Senate Majority
Leader Reid (D-NV) would need to devise a bill, assuming that to ask Boehner
for a House vote on the Senate bill passed in July is a non-starter. The bill
would likely mirror that recently proposed by President Obama (increase taxes
on income over $400,000, reform Social Security using chained CPI and perhaps a
few other fixes like the Medicare “doc fix” and means testing). Devising the
bill will be easy. Getting a bill passed in the Senate could be improbable.
Reid gets this bill passed in the Senate by working with
Minority Leader McConnell’s (R-KY) cooperation but not his blessing. This is
where the
recent death of Senator Inouye (D-HI) becomes important. A significant
number of Senators are traveling to Hawaii this weekend for the Inouye funeral.
As President Obama celebrates Christmas in Hawaii it offers an opportunity to
invite a few key GOP Senators (e.g. the Gang of Eight; the GOP represented
by Senators
Chambliss (GA), Coburn (OK), Johanns (NE) and Crapo (ID)) to travel with
him aboard Air Force One where a deal gets hammered out. McConnell’s
cooperation means the bill is not filibustered so cloture is achieved without
McConnell’s YEA vote and the bill is sent to the House for Boehner to consider.
The pressure on Boehner to schedule a vote on a bipartisan bill would be
enormous, causing him to cave to where the bill likely passes with Republican
and Democratic support (but with less than a majority of the majority); one can
hear the gnashing of gears in this scenario.
The scene on Thursday in the GOP conference leading to
Boehner’s Plan B being pulled from the floor because there were not enough
Republican votes means that the GOP House caucus is more
intimidated by potential Tea Party primary election challengers than its own
leadership. Returning to the
castaway analogy of previous notes, what happened yesterday is akin to the
final chapter of Lord of the Flies where the stranded children revert to savagery (Boehner
playing the role of Ralph). The question is whether the adults, as they did in
the book arrive in time to set things straight. The outlook is gloomy,
particularly for Speaker Boehner who could be entering his final term in that
office given the current outlook of the Fiscal Cliff negotiation and the mood
of GOP conference conservatives. The complex scenario described above is the
difference between a deal before Dec. 31st and going over the
Fiscal Cliff.
If next week, while Congress is in recess, Reid is
talking with both the White House and McConnell then an attempt is being made
to get a deal done by the end of the year. Otherwise, both sides are prepared
(and to some extent willing) to go over the Fiscal Cliff in order to redefine
the context of the negotiation that will occur in the 113th
Congress where Republicans have fewer Members than in the 112th,
weakening the GOP’s hand but also putting the debt ceiling front and center.
Take Note! Sequester: Consider that the
required cut of more than eight percent of the Federal Aviation
Administration’s budget will entail some hard hitting realities that will
cripple the US aviation industry: 2,000
air traffic controllers furloughed; 240 airport control towers closed;
9,000 security screeners
and 1,600 custom officials
furloughed. For airlines this will mean a reduction in services, less capacity,
reduced aircraft certification and fewer flights (requiring less fuel), as well
as a lag in NexGen implementation.
For cargo: a loss of 2 billion
pounds of freight capacity.
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