The U.S. is going over the fiscal cliff

December 31, 2012 12:00:00 AM PST
President Barack Obama and Senate Republican leader Mitch McConnel said they are near a deal to avoid wide-ranging tax increases and spending cuts that take effect with the new year. That deal is expected to increase the estate tax, extend unemployment benefits, and bring back higher rates on the country's top earners.

Democrats have reportedly offered a major concession from households earning $250-thousand to those making $450-thousand per year. This has created a divide within the party, with Senator Tom Harkin saying he and other democrats may block such a deal.

"If we're going to have some kind of a deal, the deal must be one that really does favor the middle class, the real middle class," said Senator Tom Harkin (D) Iowa.

"Senator Reid should put the bill on the senate floor, let the American people see the progress, not another deal behind closed doors," said Senator John Barrasso (R) Wyoming.

A sticking point in negotiations seems to be how long to delay the sequester -- the $110-billion in domestic and military spending cuts.

President Obama said any agreement would have to be balanced and include revenue increases.

Valley families say they're feeling anxious after the hold up on the final deal. Both Democratic Congressman Jim Costa and Republican Representative Devin Nunes are in the nation's capital Monday night monitoring meetings between senate leaders. But people in the Central Valley say they are tired of waiting, and they are ready to see results.

"It's frustrating because they cannot make a decision to move us forward, and it seems like we are all just hanging on and waiting for an answer," said Cyndi Kaluza of Coarsegold.

"I just think everybody is so frustrated that congress can't get their act together," said Peter Willcock of Fresno.

Republican Congressman Devin Nunes was in Washington D.C. Monday night and was closely monitoring meetings between Senate leaders. "Everything done is being done in meetings where the Senate comes up with a proposal, they float it to the House side to see what might be able to pass and we analyze those."

Rep. Nunes is not in favor of tax increases and wants the current rates to remain. He says a tax hike will only hurt small businesses and stunt economic growth. "I think any deal that is reached will not be good for the United States, for California or the Valley. There is no outcome at this point that leaves me optimistic."

But democratic house leaders such as Congressman Jim Costa said a compromise is the only way to move forward and strengthen the American economy. "This recovery has been fragile. Across the country we are starting to see housing costs pick up, we are starting to see some construction activity there."

Officials in both parties have said an agreement has been reached to prevent tax increases on most Americans -- while letting rates rise on individual incomes over $400-thousand and household earnings over $450-thousand. But the sticking point on Monday evening was how to deal with spending cuts. Lawmakers say they're still willing to negotiate.

While the deadline to prevent tax increases and spending cuts was technically midnight, the passage of legislation within the next 72 hours should reduce the impact to taxpayers.