The Stock Market Drops as Fiscal Cliff Approaches

Photo: J. Scott Applewhite[/caption]

On Wednesday, Majority leader in the House, John Boehner (R-Ohio), held a press conference where he remarked that House Republicans were ready and willing to work with the president to tackle the ominous fiscal cliff problem. Republicans have been unwavering in their opposition to allowing tax cuts to expire for any income bracket, whereas the president’s proposal requires those making over $250,000 return to Clinton-era tax rates, an increase of 3 and 4.6 percent, respectively.

“If there’s a mandate in yesterday’s results, it’s a mandate for us to find a way to work together on the solutions to the challenges that we all face as a nation. My message today is not one of confrontation but one of conviction… Mr. President, the Republican majority here in the House stands ready to work with you to do what’s best for our country. That’s exactly what I told the president earlier today. That is the will of the people, and we will answer to them.”

– John Boehner on Wednesday

Allowing the Bush Tax Cuts to expire for top earners was a major promise coming from the Obama administration during the campaign. This critical campaign promise might produce inflexibility on the president’s part to negotiate with House Republicans.

“We should not raise taxes on middle class families or small businesses, not when so many folks are just trying to get by… That’s why I’m calling on congress to extend the tax cuts for the 98% of Americans who make less than $250,000 for another year. The proposal I make today would extend these tax cuts for 97% of all small business owners in America … So this isn’t about taxing job creators this is about helping job creators.”

– Barack Obama on the campaign trail in July

It remains to be seen whether or not Republicans will back down from preventing tax hikes on 2% of Americans in order to preserve the tax cuts for those making less than $250,000 a year. However, Boehner left little room for such a possibility. “This is why going over part of the fiscal cliff and raising taxes on job creators is really no solution at all.”

Since Obama’s re-election the Dow Jones has sunk 31 points or 2.5%, signaling little confidence in Washington to finally tackle the nation’s mounting fiscal woes. In spite of growing positive reports on the economy, regarding employment and a slight narrowing in the trade deficits, traders were unimpressed with the legislative outlook. Leaders in both parties have pledged to take a bipartisan, balanced approach, but with the fiscal cliff ahead and the stock market dropping many Americans remain skeptical.