Gussing the Fiscal Cliff's Fate - Article Example

As stated by the then presidential candidates, the White House, Federal Reserve Chairman and Congress Members, the event of going over the cliff would have been destructive and irresponsible. This paper will give a brief of the guessing of the fate of the fiscal cliff. The guessing of the fiscal cliff’s fate was centered on who between the two presidential candidates would make it to the Office. Questions were rife whether the Congress would push the financial system over the economic cliff.

The functionality of Washington was questioned in light of speculation that the president to be elected, and the Congress would allow taxes to shoot up and government spending to be reduced, all with the risk of a renewed recession. It will be remembered that, in August 2011, it was agreed between President Obama and the Congress that annual federal spending would be reduced by $900 billion spread over a 10 year period (Wall, 2012). That was approximately a 33 percent cut of the total federal budget.

In a bid to accomplish more, President Obama signed into law a bill passed by the Congress that required spending cuts in all sectors from 31st December 2012. That was unless an agreement was reached on an amalgamation of tax increases and benefit cuts that would save another $1.2 trillion in 10 years. It was gambled on Wall Street that the Congress would get a way out of the quagmire after the election by making an arrears deal or calling off the whole thing. Some Democrats ironically argued that if the nation went over the fiscal cliff, it would give them a better chance to negotiate with the Republicans, come 2013.

Some Republicans, too, had the same opinion. However, it was difficult at that time to differentiate between genuine convictions and bargaining rants (Wall, 2012). Those who believed that Mitt Romney would win the elections also believed that Congress would suspend the whole issue up to mid-2013 in order to allow him time to design a budget. On the other hand, President Obama’s supporters believed that if he won, the dynamics would depend on whether the victory was strong enough or by a trivial margin.

Further, the fate would also be determined by the number of Senate seats won or lost by Republicans in the House. As presidential elections drew nearer, polls indicated that incumbent President Obama would retain his seat, and the Congress would remain much as it was. In that case, sympathetic senators and administration optimists from both parties foresaw a situation where the president would offer a new plan that would curb increases in benefits, especially Medicare, than the previous proposals.

Bipartisan negotiations would also be seen, in which instant down payment, albeit small, would be availed towards reduction of the federal deficit on items that enjoyed bipartisan support. From the negotiations, instructions would be issued to appropriate congressional committees requiring them to sketch tax reform laws (Wall, 2012). The draft laws would be expected to raise revenue amounts decided upon and also find another amount agreed on for savings from benefit agendas within 2013 through procedures that require 51 senate votes for approval.

Finally, the negotiations were expected to offer a contingency plan that both the president and Congress could live with, not like the previous one. The plan was expected to materialize from among the several bipartisan anti-deficit strategies proposed. However, all the assumption was