The Last Word with Lawrence O'Donnell, 12/21/12, 7:00 PM ET

Preparing to head over the fiscal curb

The House of Representatives now stands in recess until December 27, just 4 days before we hit the fiscal curb on January 1. What will happen on January 2? MSNBC's Lawrence O'Donnell discusses with The Washington Post's Ezra Klein.

Obama: ‘Common ground’ is to avert middle-class tax hike

Updated

After House Speaker John Boehner failed to convince House Republicans to pass his “Plan B” tax bill, which would have allowed tax rates to increase on millionaires,  Boehner now has four days to strike a deal that would avert the fiscal curb. On Friday, President Obama asked Congress to pass a bipartisan agreement that would extend tax cuts for people earning under $250,000 and unemployment benefits before January 1st, saying he is “still ready and willing” to pass a comprehensive package after Christmas break, provided leaders find “some common ground.”

President Obama spoke with Speaker Boehner and met with Harry Reid just before the press conference to ask “leaders of Congress to work towards a package that prevents a tax hike on middle-class Americans, protects unemployment insurance for 2 million Americans, and lays the groundwork for further work on both growth and deficit reduction.”

“That’s an achievable goal,” the president said. “That can get done in 10 days. Once this legislation is agreed to, I expect Democrats and Republicans to get back to Washington and have it pass both chambers, and I will immediately sign that legislation into law before January 1st of next year.”

Obama reminded that even a week away from the tragic shooting at Sandy Hook elementary school, “now is not the time for more self-inflicted wounds–certainly not those coming from Washington.” “Nobody gets 100% of what they want,” Obama said, acknowledging that it is no longer possible to achieve a deal between all parties involved to avert the fiscal curb.

NBC’s Mark Murray has stated that going over the cliff is the most likely option. Currently, the White House and Congress have three remaining options:

1. The White House and the Senate (both Majority Leader Harry Reid and Minority Leader Mitch McConnell) work on a quick fix – like raising rates on income above $250,000 – that they can force through the House.

2. President Obama still tries to strike a grand bargain, now holding more leverage.

3. We go over the cliff.

msnbc policy analyst Ezra Klein wondered on The Last Word about the remaining options. Either way, a grand bargain does not seem likely. Klein asked, “Does the political pressure come quick enough that it disrupts the economic pain, that it forces a deal before we get into real economic pain, or does it go in the other direction–we get economic pain and the political pressure either doesn’t come or doesn’t come in the right way. Somehow, it creates more gridlock.”

Klein went on further to note a potential worst-case scenario: “The thing that terrifies me–is if we go a month, a month and a half without a resolution we begin to run into the debt ceiling. And if we’re going into a fiscal cliff period, a contraction from government policy, and then on top of that, we have a debt ceiling crisis. We’re going to unleash essentially an economic hell on this nation.”

msnbc’s Lawrence O’Donnell has dubbed going over the curb an inevitable option. O’Donnell said during Friday night, “The fascinating thing is going to be what are the White House’s terms once you hit January 1 and will all the same stuff be on the table or will the president simply demand a fix in the tax rates as a starting point, pass the bill that fixes the tax rates first, then you can come up here and talk about the other stuff?”

Obama: 'Common ground' is to avert middle-class tax hike

Updated