From “‘Major setback’ in fiscal cliff talks,” Manu Raju and John Bresnahan, Politico:
“Negotiations between Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell have suffered a ‘major setback’ after Republicans demanded the inclusion of a new method for calculating entitlement benefits as part of the fiscal cliffpackage, according to Democratic sources.
“The provision, known as ‘chained CPI,’ is opposed by many progressives because it would result in lower payments for Social Security beneficiaries.
“Democrats are objecting to including this as part of the current negotiations on a scaled-down fiscal cliff deal. They say they’ve already given ground on other issues, including raising the threshold for new taxes to around $400,000 annually, as well as showing flexibility on estate taxes, sources said.
“But Republicans are insisting on the ‘chained CPI’ provision in exchange for raising taxes.
“If no deal is reached — and that’s where things stand at the moment — Reid will push a proposal to raise taxes for those families making over $250,000 in income, though Republicans say that stands little chance of passing both chambers before New Year’s Day. With no deal, about $500 billion in tax hikes and spending cuts would take effect in 2013, a double-dose of austerity that could send the economy back into recession.”
The stock market won’t be happy, and when the stock market ain’t happy, ain’t nobody happy.