“A scary new world of higher taxes, reduced spending and austerity politics.” That’s what many say is in store if Congress and President Obama cannot come to an agreement on what to do about expiring tax cuts and sequestration, aka the fiscal cliff.
The president released his plan for averting the fiscal cliff yesterday, which includes proposals for new spending that Democrats say is essential to stimulating the economy. Many Republicans in Congress, on the other hand, want to see entitlement reform and a pledge not to raise taxes on the wealthiest Americans. Some reports, however, say that there are Republican members of Congress who want their party to be a little more flexible on taxes.
Round 1 ends in stalemate. Meanwhile, the New York Times provides us with a reality check on tax rates, showing that for all but the lowest income people, tax rates have decreased in the last 20 years. And in The Nation, we read about the very real consequences of sequestration for people living in poverty. When you’re already standing at the edge of your own personal fiscal cliff, it doesn’t take much to push you over the edge.
What do you think of President Obama’s proposal? Do you think the president and Congress will come to agreement in time? Tell us what you think in the comments.
Ground feel unsteady under your feet? It might be that you’re standing at the edge of a fiscal cliff.
According to Politico, “If Congress doesn’t take action by the end of the year, a package of tax cuts adopted during George W. Bush’s administration expire while deep spending cuts kick in. If that happens, the economy would go over a ‘fiscal cliff.’” While a steep reduction in federal spending could help shrink the budget deficit, less spending also means even less stimulus to our weak and struggling economy.
Recent reports have shown Members of Congress in heated debate over the issue, but expectations are low for any resolution occurring before the November 6 elections.
As we noted in Memo to Members recently, there is another theory: it’s not a fiscal cliff, it’s a fiscal slope. According to the Center on Budget and Policy Priorities, chances are, even if a deal is not reached by the beginning of 2013, Congress is likely to work something out eventually- meaning that consumers and businesses will have enough confidence to keep spending. Democrats have shown a willingness to test that fiscal slope theory, if it means the richest 2% of Americans would pay their fair share of taxes.
Do you believe we’re at the edge of a cliff, or a slope? What action do you think Congress needs to take? Let’s talk about it in the comments.