Any hope to avoid next week's fiscal cliff?

Doubtful, at least based on what the major players are saying publicly. White House sources tell CNBC's John Harwood that the president will not be sending a scaled-down offer to the Senate (contrary to earlier reports), and Senate Majority Leader Harry Reid says that a deal is unlikely before next week's deadline. As with any negotiation, there's always the chance of some unexpected breakthrough, though at some point all roads must get through the House Republican caucus, many of whose members have zero interest in compromise. Not compromising seems to be considered a sign of strength, and it's doubtful that anything - market meltdown, corporate pressure, political ambitions - will alter their warped view of the world. The only possible way out is for House Speaker John Boehner to patch together a coalition of moderate Republicans and Democrats who would be willing to sign off on a White House deal - and so far Boehner shows no interest in taking that route. That's the bad news - here's the worse news: Most Republican House members represent districts that are hypartisan - that is, they are protected from Democratic challengers. This means that their constituents won't be pushing for a compromise. If anything, they'll be pushing not to compromise. From the NYT's Nate Silver:

The median Congressional district is now about five points Republican-leaning relative to the country as a whole. Why this asymmetry? It's partly because Republicans created boundaries efficiently in redistricting and partly because the most Democratic districts in the country, like those in urban portions of New York or Chicago, are even more Democratic than the reddest districts of the country are Republican, meaning there are fewer Democratic voters remaining to distribute to swing districts. Certainly, Republicans can't be entirely happy with their predicament. The Electoral College now seems to disadvantage them at least slightly, and if they struggle in the 2014 and 2016 elections, a better case can be made that the party is underachieving. But because of the way districts are configured, their position in the House should be quite robust: it would require a Democratic wave year, and not a merely decent election for Democrats, as in 2012, for Republicans to lose control of the House.

The media narrative has Washington's logjam already impacting the economy, with holiday sales not meeting expectations and consumer confidence plunging in December. But it's too early to make cause-and-effect conclusions. Disappointing retail numbers are preliminary and whatever sluggishness in November and December could be due to Hurricane Sandy or other factors (pessimism about the budget talks only emerged in the past few days). And while Wall Street investors are probably nervous about the fiscal deadlock, it's worth noting that volume is usually light in the last few days of the year and the market is subject to lots of volatility.

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Mark Lacter
Mark Lacter created the LA Biz Observed blog in 2006. He posted until the day before his death on Nov. 13, 2013.
Mark Lacter, business writer and editor was 59
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