Politics

November 14, 2012

Some Dems: drive over 'fiscal cliff,' then bargain

Democrats and Republicans appear heading toward another round of brinkmanship that will test who blinks first on questions of major importance.

Andrew Taylor and Charles Babington/Associated Press

WASHINGTON — Some Democrats are pushing an unorthodox idea for coping with the "fiscal cliff": Let the government go over, temporarily at least, to give their party more bargaining leverage for changes later on.

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FILE -In this Friday, Feb. 20, 2009, file photo, President Barack Obama listens as Vice President Joe Biden speaks in the East Room of the White House. Asked to name the one step they'd push most urgently if they were the newly re-elected President Barack Obama, a dozen leading economists advise President Barack Obama to sidestep the "fiscal cliff" during his second term of office. Economists say that the package of tax increases and deep spending cuts that will take effect in January unless Congress reaches a budget deal by then, could tip the U.S. economy back into recession next year. (AP Photo/Ron Edmonds, File)

ASSOCIATED PRESS

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FILE - In this Sept. 13, 2012 file photo, House Minority Leader Nancy Pelosi of Calif. gestures during a news conference on Capitol Hill in Washington. A temporary reduction in Social Security payroll taxes is due to expire at the end of the year and hardly anyone in Washington is pushing to extend it. Neither Obama nor Romney has proposed an extension, and it probably wouldn�t get through Congress anyway, with lawmakers in both parties down on the idea. (AP Photo/J. Scott Applewhite, File)

ASSOCIATED PRESS

The idea has plenty of skeptics, and the White House regards it frostily. But it illustrates the wide range of early negotiating positions being staked out by Republicans and Democrats as lawmakers gathered Tuesday for their first postelection talks on how to avoid the looming package of steep tax hikes and program cuts.

Just as brazen, in the eyes of many Democrats, is the GOP leaders' continued insistence on protecting tax cuts for the rich. President Barack Obama just won re-election, campaigning on a vow to end those breaks.

Democrats and Republicans appear heading toward another round of brinkmanship that will test who blinks first on questions of major importance. It's a dance that has infuriated many Americans, shaken financial markets and drawn ridicule from foreign commentators.

In late 2010, after big GOP midterm election wins, Obama backed off his pledge to raise taxes on the rich. In the summer of 2011, House Republicans pushed Congress within a hair of refusing to raise the debt ceiling, leading to the first-ever downgrade of the government's credit rating. And last December, it was the Republicans' turn to blink, yielding to Obama's demand to extend a payroll tax break.

The "fiscal cliff" deadline comes in seven weeks. One provision: Unless Congress acts, all Bush-era tax cuts would expire, raising 2013 tax bills for most Americans. Obama wants to end those tax cuts only for households making more than $250,000 a year. Republicans insist on no tax rate increases anywhere.

If the "fiscal cliff" takes effect, congressional Republicans would feel pressure to give ground in several areas to achieve their top goal: restoring tax cuts for as many people as possible. That's why Sen. Patty Murray, D-Wash., and other Democrats have said their party's leaders should seriously consider letting the Jan. 1 deadline pass and then negotiate with Republicans under sharply different circumstances. Some or most of any new agreements could be made retroactive to Jan. 1, they say.

If Republicans refuse to let tax cuts expire for the wealthy, Murray told ABC's "This Week," ''we will reach a point at the end of this year where all the tax cuts expire and we'll start over next year. And whatever we do will be a tax cut for whatever package we put together. That may be the way to get past this."

Murray's allies say voters would blame Republicans for refusing to yield, especially on tax rates, given that Obama won re-election. A recent Pew Research poll supports that view. More than half of the respondents said they would chiefly blame congressional Republicans if there's no compromise on the fiscal cliff; 29 percent would blame Obama.

It's questionable whether Obama and Congress' Democratic leaders would let the government go over the fiscal cliff. Numerous financial analysts say the event would frighten markets, alarm employers and probably trigger a new recession.

However, there's a school of thought that the cliff is actually a slope, and the economy could withstand the effects of the automatic spending cuts and the renewal of Clinton-era tax rates for at least a few weeks to give time for negotiations to continue. Liberals note that tax rate increases would be felt gradually.

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