WASHINGTON (MarketWatch) - President Barack Obama said Monday that a deal to avert the fiscal cliff was close. "It appears an agreement to prevent this new year's tax hike is within sight but not done," Obama said in a short speech to supporters at the White House. Obama said the potential deal would raise taxes only on the wealthiest Americans and would extend popular tax credits for college education and clean energy. It would also extend unemployment benefits, he said. The deal is not finished because of negotiations over the $100 billion in automatic spending cuts that were set to begin on Jan.1. Obama said the scheduled cuts were too blunt. "We're using an axe instead of a scalpel," he said. Obama said higher taxes had to be part of any deal to stop the spending cuts and would also have to be part of future deficit reduction. "If we are going to be serious about deficit reduction and debt reduction, it is going to have to be a matter of shared sacrifice, at least as long as I'm president, and I am going to be president for the next four years, I hope," he said.

The financial markets are proving to be surprisingly indifferent to the last-ditch negotiations underway Monday to avert an austerity crisis. The stock market was up 0.2 percent at 11:00 a.m. as measured by the Standard & Poor's 500 index. A key measure of expected market volatility known as the Vix index was actually down slightly Monday morning, falling 2.4 percent after a steep rise on Friday. Read full article >>

Consider the ongoing "fiscal cliff" negotiations from the Republican Party's perspective. To Republicans, these negotiations have always had two discrete parts. First, there was the fiscal cliff, with its promise of huge, automatic tax increases. They've always known that the fiscal cliff gives President Obama and the Democrats huge leverage. But after the fiscal cliff comes the debt ceiling, and they've always believed that that's when they'll get their leverage: Just as in 2011, they'll force the White House to cut spending if it wants to avoid default. Read full article >>

Sen. Bob Corker, (R-TN), provides the latest details on "fiscal cliff" negotiations in Congress.

As the year comes to an end, dysfunctional Congressional politics continues to dominate the headlines, and rightly so. Our politicians are scrambling to deal with a mess that they created all on their own -- a fiscal cliff that risks pushing the country into recession. And while a last minute "micro deal" is still possible, there will be little celebration, nor should there be. Whatever transpires in the next few days, look for politicians to point fingers at each other. By diverting your attention to those in the other party on Capitol Hill, their hope is, of course, to influence your assessment of who is to blame for taking the country so close to the edge. I argued in a prior post that the fiscal cliff is the result of a monumental Congressional political miscalculation back in the summer of 2011 -- one that a "game theorist" could have predicted based on an analytical assessment of the conditions under which politicians cooperate. Yesterday, Jon Horne, a PIMCO colleague, pointed me to a column by Nate Silver which takes the analysis an important step further. And Mr. Silver's findings are quite depressing. An anchor for Mr. Silver's analysis is the view that "one of the firmest conclusions of academic research into the behavior of Congress is that what motivates members first and foremost is winning elections." By combining this with realities on the ground, his analysis makes a strong case for continued political polarization going forward. Mr. Silver's conclusion is stark: "As partisanship continues to increase, a divided government may increasingly mean a dysfunctional one." It was once fashionable to argue that a divided government was good for the economy. The view then was that politicians would be too busy with political brinkmanship to get in the way of a dynamic private sector. As a result, unfettered by government interference, the private sector was more likely to invest, hire and prosper. It is hard...

U.S. Treasurys were little changed early Monday, with just hours to go for U.S. lawmakers to strike a deal to avert the "fiscal cliff."

U.S. stock futures signaled a slightly higher open for Wall Street on Monday, with just hours to go for U.S. lawmakers to strike a deal to avert the "fiscal cliff."