Obama to cut short Xmas vacation to deal with fiscal cliff negotiations

President Obama is planning to cut short his Xmas vacation and return to Washington. He will make a final attempt to reach a deal with the Republicans, even though a compromise looks to be quite difficult to achieve.

Even if Boehner were to compromise on the tax issue, the Republican-controlled House would not likely agree. The House already rejected Boehner's Plan B that would have raised taxes only on those earning a million or more a year.

Both chambers of the US Congress will return from holidays on Thursday and start work again. Hopes for any grand bargain have faded. President Obama is pressing for a plan that would be a stop-gap measure. Obama wants to extend the Bush tax cuts for all those earning less than $250,000 a year and extend unemployment benefits. He would also cancel the scheduled automatic spending cuts.

At the very least, Obama will need to raise the income level to which he wants to extend tax cuts. Boehner failed to pass a bill that extended the line to those earning a million a year. However, a New York Times article reports that there are growing signs that some members of both parties are prepared to accept a deal that raises taxes on people at the highest income levels. No evidence is given for this or that even if it is true, that there are enough votes to pass a deal through both houses.

The government has been seeking a resolution through discussion with Senate Democrats who control the house and also may have the support of some Republican senators. However, the Republican Senate leader, Mitch McConnell, has given no sign that he would not try to block any deal that has tax increases. The situation in the House is much worse.

The House is controlled by Republicans and has already blocked a Republican bill that tried to increase taxes on the very wealthy. Today could be the last day of Obama's holidays, as he may fly back to Washington as early as Wednesday. This would give him a bit more time for talks.

Lawmakers have expressed little but pessimism for the prospect of an agreement coming before Jan. 1. On Sunday, Sen. Kay Hutchison, a Republican from Texas, said if there is any deal it will be "a patch because in four days we can't solve everything."

Julia Coronado, an economist for BNP Paribas said that markets have up to now been remarkably complacent, thinking that a deal will definitely be reached. She predicted that if no deal is reached, markets will react with a steep downfall. This will no doubt put a great deal of pressure on politicians to reach a deal of some kind and fast.