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First Thoughts: Farewell to the 112th Congress

Farewell to the 112th Congress, regardless of what happens today… But are Biden and McConnell close to a deal?... Why we are still possibly headed off the cliff… Why that would be a missed opportunity for both sides… The blame game… Obama lays out second-term agenda on  “Meet the Press”… Hillary Clinton in the hospital… And Happy New Year.

*** Farewell to the 112th Congress: With just hours to go before reaching the midnight deadline of the so-called fiscal cliff, are we on the cusp of a last-minute deal? Or will things, once again, fall apart? Regardless of what happens today, the 112th Congress is going to wind up as the least popular and least productive Congress (in terms of legislation becoming law) in the modern era. For starters, Congress’ approval rating the last time the NBC/WSJ poll measured it (in August 2012) was just 12%, and a whopping 82% disapproved of Congress -- the highest percentage in the history of our NBC/WSJ poll. In addition, just 219 bills have been passed into law -- the lowest number since Congress began tracking this number in the 1940s. (And many of these bills were naming courthouses or post offices.)  The previous low was 333 in the 104th Congress (1995-1996). Throughout its history, of course, Congress has always been a dysfunctional place; in fact, the Founding Fathers ensured it that way (with the federal government’s checks and balances). But this particular Congress, which comes to an end on Jan. 3, has been uniquely dysfunctional. Just consider: the current fiscal-cliff debate, the debt-ceiling standoff of 2011 that resulted in an S&P credit downgrade, the Super Committee’s failure, the near government shutdown in the spring of 2011, the defeat of the U.N. Disabilities treaty, etc. With the debt ceiling, the fiscal cliff, and the near government shutdown, it’s hard not to conclude that Congress has been an active player in the sluggishness of the U.S. economy.

*** But are we close to a deal? All that said, Senate Minority Leader Mitch McConnell and Vice President Biden are very close to a deal. According to a source with knowledge of the negotiations, Biden is offering McConnell raising tax rates on income above $400,000-plus and an up-or-down vote on the estate tax in return for unemployment insurance and having the sequester offset by some of the increased revenues. (Folks, this is VERY similar to deal that President Obama offered House Speaker John Boehner, but from which Boehner walked away.) From what we understand, McConnell wants a deal -- he wants to get this tax issue off the table. So they are close. The question is whether Boehner would bring such a deal to the floor and whether it could pass in time. But if a Biden-McConnell deal gets 70 or more votes in the Senate, Boehner might not have no choice but to bring the legislation to the House floor.

Kevin Lamarque / Reuters

Vice President Joe Biden looks on during a White House event in which President Barack Obama announced the nomination of Senator John Kerry as Secretary of State, Dec. 21, 2012.

Related: Deficit reduction becomes key sticking point on fiscal cliff

*** Why we are possibly headed off the cliff: So it’s possible Congress could still come to some kind of agreement, but it's always been a likely outcome that we're headed to go off the so-called fiscal cliff. The reason: It's become the easiest -- and safest -- path for both sides; NBC's Mike Viqueira has called it the "inertia scenario." For Democrats, going over the cliff ensures the elimination of the Bush tax cuts, and it gets them the tax revenue they've been demanding without having to give up a thing. What's more, Democrats probably hold the upper hand if we go off the cliff, given all the polling suggesting that the American public would blame Republicans more than Democrats. For Republicans, having the Bush tax cuts expire means they don't have to vote to raise taxes and thus break any tax pledge. Instead, beginning in the New Year, they get to vote to lower them for the middle class (the income threshold TBD). 

*** Why that would be missed opportunities for both sides: But if we go over the cliff -- the combination of tax increases and spending cuts set to commence after today -- it will be a missed opportunity for both sides, too. For President Obama, it will be evidence that the GOP "fever" that he said would break after his re-election hasn't come close to ending yet. In addition, it would signal that the second-term agenda he's pursuing (immigration, energy) probably isn't going anywhere. For Republicans, going over the cliff means that they're giving up revenue without getting anything in return like spending cuts and entitlement reform, both of which Obama was willing to offer. Republicans believe that they'll be able to extract those things in a future showdown of the debt ceiling, but we're unsure that the White House or, more importantly, the business community is willing to play that game in 2013. 

*** What happens if we go over the cliff: But here’s an important reminder if we go over the fiscal cliff: The financial/economic world won’t come to an end, at least in the short run. While some things will take place immediately, others (including rising tax rates and government cuts) will be spread out over the year, and Congress has the ability to fix them retroactively. As the New York Times wrote last week, “Some hits — like a two percentage point increase in payroll taxes and the end of unemployment benefits for more than two million jobless Americans — would be felt right away. But other effects, like tens of billions in automatic spending cuts, to include both military and other programs, would be spread out between now and the end of the 2013 fiscal year in September. These could quickly be reversed if a compromise is found. Similarly, the expiration of Bush-era tax cuts on Jan. 1 would not have a major impact on consumers if Congress quickly agreed to extend them for all but the wealthiest Americans in early 2013, as is widely expected. Other probable changes, like a jump in taxes on capital gains and dividends, would most likely be felt over a broader period rather than as an immediate blow to the economy.” Yet one thing is for certain if we go over the cliff: The financial markets won’t like it.

*** The blame game: In his interview on “Meet the Press,” President Obama said congressional Republicans would get the blame if the country goes over the fiscal cliff. “Congress has not been able to get this stuff done. Not because Democrats in Congress don't want to go ahead and cooperate, but because I think it's been very hard for Speaker Boehner and Republican Leader McConnell to accept the fact that taxes on the wealthiest Americans should go up a little bit, as part of an overall deficit reduction package.” When NBC’s David Gregory asked Obama if he would deserve any blame, the president replied, “I negotiated with Speaker Boehner in good faith and moved more than halfway in order to achieve a grand bargain. I offered over a trillion dollars in additional spending cuts so that we would have $2 of spending cuts for every $1 of increased revenue. I think anybody objectively who's looked at this would say that we have put forward not only a sensible deal but one that has the support of the majority of the American people, including close to half of Republicans.”

*** Obama’s second-term agenda -- immigration, stabilizing the economy, energy: Also on “Meet,” Obama laid out his second-term agenda. “I've said that fixing our broken immigration system is a top priority. I will introduce legislation in the first year to get that done… The second thing that we've got to do is to stabilize the economy and make sure it's growing. Part of that is deficit reduction. Part of it is also making sure that we're investing, for example, in rebuilding our infrastructure, which is broken… Number three. We've got a huge opportunity around energy. We are producing more energy and America can become an energy exporter. How do we do that in a way that also deals with some of the environmental challenges that we have at the same time? So that's going to be a third thing.” But what Obama DID NOT bring up on his own -- guns. Indeed, he didn’t sound like a guy ready to go after guns, unless the public is clearly behind it. “Ultimately, the way this is going to happen is because the American people say, ‘That's right. We are willing to make different choices for the country and we support those in Congress who are willing to take those actions.’”

*** Hillary Clinton checks into hospital: Beyond the fiscal cliff, the other big news is the health of Secretary of State Hillary Clinton. As NBC’s Andrea Mitchell reported on “TODAY” this morning, Clinton is now in a hospital in New York. Her spokesman released this statement last night: “In the course of a follow-up exam today, Secretary Clinton's doctors discovered a blood clot had formed, stemming from the concussion she sustained several weeks ago.  She is being treated with anti-coagulants and is at NewYork-Presbyterian Hospital so that they can monitor the medication over the next 48 hours. Her doctors will continue to assess her condition, including other issues associated with her concussion. They will determine if any further action is required.” Bottom line: This clearly is more serious than we originally thought.

*** Happy New Year! Finally, to all of our readers – have a safe and happy New Year. And thanks for reading us throughout 2012. Your morning First Read note will return on Thursday, Jan. 3.

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