Wednesday, January 2, 2013

Fiscal Cliff - Republican Party stops short of shooting itself in the foot.

President Obama wins showdown (photo courtesy The Daily Beast)

As the U.S. public (and world financial markets) watched in dismay, the Republican Party, held the whole country hostage till the very end, just to protect the top 2% earners in their country. The American voters must wonder, why they voted for such self serving politicians who only care about the lobbies that fill their election coffers.

In a deal struck earlier, between Vice President Joe Biden and Republican Senate Leader, Mitch McConnell, Senate passed a bill with an overwhelming majority of 89-8 raising taxes an those earning over $400,000 ($450,000 for families), at the same time making tax cuts permanent for those under this threshold. The bill was passed around 2AM on January, 1.

The House of Representatives then took up the bill yesterday and after much shenanigans and dramatics keeping the country and world financial markets on the fiscal edge, passed the bill late in the evening with 1/3rd Republicans voting with the Democrats.

Thus one segment of fiscal cliff was averted. But it begs the question, why was this not done a month ago and why play these foolish games to the end? Republican Party's reputation has been much tarnished by these antics.

The main components of fiscal cliff i. e. spending cuts and debt ceiling still hang in the balance as deadline for those has been extended by two months. The sensible thing to do now, is for Republicans and Democrats to sit down with White House officials and come to an agreement on these issues during next couple of weeks and certainly well before the deadline so as to send a positive message to financial markets that common sense finally prevailed.

This is win for President Obama, who had committed in election campaign to raise taxes on the wealthy. Vice President Joe Biden has especially come out of  this smelling like roses. With his negotiating skills, he not only got Senate Republicans to support the bill, but he also pacified renegade members of his own party.