THE BLOG
12/29/2012 09:42 am ET Updated Feb 28, 2013

Fiscal Cliff: The Next Few Days

Read the details for yourself, but from what I'm picking up, resolution of the fiscal cliff before New Year's still requires Rep. Boehner to bring a vote up in the House that will pass with majority Democratic votes, and I've seen no indication that this will happen.

[Update: OK, I take that back... I can see a weedy, pot-hole-filled path to a deal before New Year's. Based on sketchy details I'm picking up in the air, McConnell and Reid are apparently huddling over a deal. If they come up with something acceptable to both of them, McConnell will allow it to come to an up-or-down vote. The word on the street is that if that deal passed the Senate, Boehner would allow it to come up in the House, where, depending on what's in it, it could pass with mostly Democrats. This could all happen quickly, over the next two days.]

In their big meeting Friday, the president apparently stuck to his $250,000 threshold for the tax increases, though there's behind-the-scenes chatter of a deal being discussed in the Senate with a $400,000 threshold.

That deal -- if it should come into play, which it currently is not -- may also keep the estate tax where it is now ($5m exemption, 35% rate) instead of accepting the White House reset to $3.5m exemption and 45% rate. I suspect that if Congressional Republicans (and probably some Democrats) are inflexible on that point, the White House will not accept the change... nor should they. Remember, the estate tax resets to $1m exemption and a 55% mere hours from now.

I suspect a deal that kept the threshold at $250K, suspended the sequester, patched the AMT and doc fix, and extended unemployment insurance (UI), would pass both houses of Congress and be signed by the president. The question then is: Will McConnell and Reid agree on such a deal (or something close to it -- I can see McConnell pushing for a higher tax threshold)? If not, it's hard to envision, with a few days to go, any alternative path that doesn't lead us off the cliff. In which case, what they should be talking about now is how quickly they can reverse the damage.

Me, I'm feeling intense whiplash from all of this and while there'd be signs of relief were there a deal before the deadline, I'm not sure there's cosmic economic significance between a small bore deal on December 31st or the same deal a few days later. I rather them not cram out a deal if that means accepting bad decisions.

This post originally appeared at Jared Bernstein's On The Economy blog.