“They must have forgotten that Republicans continue to hold a majority in the House,” Boehner, an Ohio Republican, said on “Fox News Sunday.” “The president’s idea of a negotiation is ‘roll over and do what I ask.’ We need to find common ground, and we need to find it quickly.”
Collender puts the odds of failure at 60 percent, as both sides need to prove their mettle to core supporters.
The risk for Obama is that Republicans will match his brinkmanship and no deal will be reached. The result would be the “fiscal cliff,” the more than $600 billion in automatic spending cuts and tax increases that start kicking in automatically at the beginning of the new year.
The nonpartisan Congressional Budget Office said in an August report said the tax increases and spending cuts would shrink economic output next year by 0.5 percent and push the unemployment rate to about 9 percent.
Moody’s Investors Service said in September it may join Standard & Poor’s in downgrading the U.S.’s credit rating unless the president and Congress reduce the percentage of debt to gross domestic product.
Markets React
Stocks have been whipsawed since the election as Obama and Boehner dueled in public.
The benchmark Standard & Poor’s 500 Index increased 0.5 percent to 1,416.18 last week and it extended its rally since Nov. 16 to 4.1 percent. The Dow Jones Industrial Average advanced 15.90 points, or 0.1 percent, to 13,025.58.
The bond market hasn’t demonstrated the same level of concern. While total national debt has soared to more than $16 trillion from less than $9 trillion in 2007, U.S. borrowing costs have tumbled. The yield on the 10-year note touched a record low 1.379 percent July 25, down from more than 5 percent in mid-2007.
Treasury 10-year yields climbed two basis points, or 0.02 percentage point, to 1.64 percent at 8:41 a.m. New York time, according to Bloomberg Bond Trader data. The rate fell eight basis points last week and reached 1.59 percent on Nov. 30, the lowest level since Nov. 19.