To most of us it was not surprising that when we woke up this past Friday, we woke up.  The doomsayers were wrong—there was no Mayan apocalypse at midnight on December 20th.  While the Mayan myth turned out to be nothing to worry about, fasten your seat belts, the fiscal cliff –an economic apocalypse predicted for midnight December 31st is very likely to happen.
Many point to the defeat of Speaker of the House John Bohner’s “Plan B” as the final straw sending us over the cliff.  But that claim is as much of a myth as the misreading of the Mayan calendar that led many people to fear a late December end of the world.
Boehner’s “Plan B” maintained and made permanent the so-called Bush tax cuts for everyone making less than $1,000,000, and let them expire for those making a million dollars or more. It was what Obama bloviated about during the campaign, tax hikes for millionaires and billionaires and a bill Nancy Pelosi suggested this past summer.
Once the Senate announced they would not bring the bill up for a vote, and the President said he would veto the bill if passed, conservative Republicans withdrew their support for the bill, as they did not want to go out on the ledge for something that had no chance of being enacted.   Over two-thirds of the House GOP caucus was ready to vote for  “Plan B” but my house sources tell me they were 10-13 short of enough votes to pass on the house floor because no Democrats would dare to vote for the bill. So the bill was withdrawn.
The day after Boehner withdrew “Plan B” he held a 58-second-long press conference reminding all that the House of Representatives passed a budget in July and a bill extending the Bush tax cuts in August, neither one of which was voted on by the Senate therefore as far as he was concerned the next move was up to Harry Reid and the Senate Democrats.  With that the speaker sent the House home for Christmas (the Senate quickly followed) and the President left for his annual Christmas trip to Hawaii. Leaving the White House and Congressional Staffs in Washington trying to come up with a compromise.
How did we end up at this point—where we are likely to go over the fiscal cliff of higher taxes and major budget cuts?
During the lame duck session in December 2010, Congress passed a bill that extended the Bush tax cuts for an additional two years and “patched” the exemptions to the Alternative Minimum for tax year 2011. This act also authorized a one-year reduction in the Social Security employee payroll tax. The Congress extended this for an additional year in 2012 with a bill that also extended federal unemployment benefits and the freeze on Medicare physician payments.
In August 2011, Congress passed the Budget Control Act of 2011 that resolved the debt-ceiling crisis. The Act provided for a Joint Select Committee on Deficit Reduction (the “super committee”) to produce legislation by late November that would decrease the deficit by $1.2 trillion over ten years. When the super committee failed to act, another part of the Budget Control Acts went into effect. This directed automatic across-the-board cuts split evenly between defense and domestic spending, beginning on January 2, 2013.

Without realizing it, this August 2011 bill is when the GOP lost its negotiation advantage.  That extension of the debt-ceiling bill should have never been passed. It was no surprise when the super committee failed, and the country has been heading for most of “the cliff” ever since.

Also, part of the cliff not mentioned, the Obamacare bill imposes new taxes on families making more than $250,000 a year ($200,000 for individuals) starting at the same time.
At the end of 2011, the patch to the Alternative Minimum Tax exemptions expired. Technically, the AMT thresholds immediately reverted to their 2000 tax year levels, a drop of 26% for single people and 40% for married couples. Anyone over these reduced thresholds at the end of 2012 would be subject to the AMT. Therefore; more taxpayers would pay more unless some legislation was passed that affects the exemptions retroactively.
Since the election, both sides have been furiously trying to find a compromise and at the same time sabotage the other side. John Boehner has between a rock and another rock.
Part of the president’s reelection victory was based on his call for higher taxes on millionaires and billionaires. But at the same time many house Republicans can point to their promise not to raise taxes as the reason they won their districts.
The day after the election, Boehner agreed to put revenues on the table and according to the Wall Street Journal Obama refused to budge
At one point, according to notes taken by a participant, Mr. Boehner told the president, “I put $800 billion [in tax revenue] on the table. What do I get for that?”
“You get nothing,” the president said. “I get that for free.”
Boehner upped his offer, the Monday before the aborted “Plan B” vote the speaker offered a deal which also included a total of one trillion dollars worth of new taxes if the president accepts one trillion dollars worth of entitlement cuts.
 Although the White House did not accept Boehner’s gambit, many thought it could push negotiations away from entrenched, ideological positions.
“Boehner has now accepted the premise of higher rates. So now we’re just arguing over details. I think it’s a significant step,” said Greg Valliere, chief political strategist at Potomac Research Group.
But that’s where the compromised is stalled, Obama wants approximately $200 billion more in taxes than Boehner has offered, Boehner wants approximately $200 billion in cuts than Obama is willing to commit.
According to the Wall Street Journal, as the talks broke down last week Obama told Boehner that he is holding all the political cards warning:
“if the sides didn’t reach agreement, he would use his inaugural address and his State of the Union speech to tell the country the Republicans were at fault.”
There is great pessimism in Washington, as most within the beltway no longer believe that a fiscal cliff compromise is possible. On one hand you have a President refusing to budge because he correctly views America will believe him when he puts all the blame on the GOP.  On the other hand you have a GOP congress that are unwilling to break the campaign promises that convinced people to elect them.
In the end the blame for going off the cliff is the American people who voted for the status quo this past November (a radically progressive President and Senate, and a conservative congress) and expected things to be different.