THE BLOG
11/27/2012 02:05 pm ET Updated Jan 27, 2013

Fiscal Cliff Negotiations Could Hinge On Fear Of Failure

Familiar faces surround the talks of a fiscal cliff compromise.

Federal Reserve Chairman Ben Bernanke, House Minority Leader Nancy Pelosi (D-Ca.), Sen. Mitch McConnell (R-Ky.), House Majority Leader John Boehner, President Obama, Sen. Harry Reid (D-Nev.) and Rep. Paul Ryan (R-Wisc.) are in talks -- again, but will they be able to strike a deal this time around and allow the American economy to recover amid five dreadful years of uncertainty and slow growth?

According to Politico.com, hopes of a negotiation aren't universal.

At face value, budget talks sounded good, but when getting down to the specifics, things have begun to look a bit less optimistic according to unnamed sources with "knowledge of the discussions."

With the deadline for the debt growing closer, a deal being made is something both sides desperately need to avoid $1.6 billion worth of cuts to the military, schools, science and mandatory spending.

Negotiations are in a difficult stage because Boehner doesn't believe Democrats are serious about entitlement cuts. He doesn't want a deal that includes the Bush tax cuts expiring for the rich or an increase in the rich's marginal tax rates (from 35 to 39.6, which would be the same as under President Clinton), but is willing to consider changing his stance if the Democrats convince him they will cut mandatory spending.

The Republicans are not confident the Democrats will hold up their end of the bargain. They are also very hesitant to allow the Bush tax cuts for the rich to expire and for marginal tax rates to go up on the rich. As a result, they want to hold off on a compromise until after the Jan. 1 deadline, which is when the cuts are triggered to begin.

The business community is not a fan of waiting any longer for a negotiation as they recently saw a bump in the market because they believe a deal is a real possibility.

Bernanke, a big player in the economic future for America, said in an interview at the Economic Club of New York,

"Cooperation and creativity to deiver fiscal clarity - in particular, a plan for resolving the nation's long-term budget issues without harming the recovery - could help make the new year a very good one for the American economy."

Not all are as pessimistic as the Republicans and House Speaker Boehner. In fact according to a Pew/Washington Post poll, Americans are confident in the parties' ability to find common ground.

Sen. Mark Warner (D-Va.) is also confident a deal will be made. As a member of the Senate Budget Committee he said Congress doesn't want to repeat their failed attempts at a deal. He told Reuters.com that the business community vigorously backing a compromise and the dire consequences on the economy if a compromise is not reached are factors to make leaders think twice about failing to reach a negotiation.

According to polls, the president has a little bit of room to negotiate with. He can push a compromise because many Americans and leaders within the business community want to see that happen. The polls do not favor Congress as a Rasmussen poll last week showed that 57 percent of likely voters back raising taxes on those who make more than $250,000.

Also, a Pew/Washington Post poll found that if a deal is not met, slightly more than half of Americans would blame Congress while only 29 percent would blame the president.

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