Speculation is growing as we approach the end of the year as to how Congress and the president will address the issue of the “fiscal cliff”— a pileup of scheduled tax increases and spending cuts that threaten to drain $560 billion out of the economy next year and derail the recovery.
President Barack Obama urged Congress today to extend expiring tax cuts instantly for all but the nation’s utmost income earners as a way to reduce half of the “fiscal cliff” that pressures the economy back into recession.
“What I’m not going to do is to extend Bush tax cuts for the wealthiest 2 percent that we can’t afford and according to economists will have the least positive impact on the economy,” the president said at his first news conference since his re-election last week.
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.
“A modest tax increase on the wealthy is not going to break their backs,” Obama said. “They’ll still be wealthy.”
Obama wants to extend the individual income tax rates for 98 percent of Americans, but he will not agree to extend them for the top 2 percent of earners, White House spokesman Jay Carney told a briefing. He said the president would demand that a deficit-cutting agreement include $1.6 trillion in new tax revenues.
If Washington fails and all of the fiscal cliff’s tax and spending measures stay in effect, the economy would fall into a mild recession in the first half of the year before resuming its weak growth rate in the second, the Congressional Budget Office estimated last week.
Unemployment, now 7.9 percent, would rise to 9.1 percent by the end of 2013, it said.
As the president and congressional leaders begin negotiations to avoid the “fiscal cliff” deadline at the end of the year, there is widespread public concern about the possible financial consequences. More say the automatic spending cuts and tax increases scheduled to take effect in January would have a major effect on the U.S. economy than on their own finances. But nearly identical majorities say the effect of the changes would be mostly negative for the economy, 62 percent, and their personal financial situation, 60 percent.
The public is skeptical that President Obama and congressional Republicans will reach an agreement by the end of the year to avoid the fiscal cliff. About half, 51 percent, say the two sides will not reach an agreement, while just 38 percent say they will. If no deal is reached, more say that congressional Republicans would be more to blame than President Obama, 53percent vs. 29 percent.
The latest national survey by the Pew Research Center for the People & the Press and The Washington Post, conducted Nov. 8-11, 2012, among 1,000 adults finds sharp partisan divisions over prospects for a deal to avoid the fiscal measures from automatically taking effect.
Obama signed legislation two years ago extending the Bush tax cuts in their entirety after saying he wouldn’t.
Asked why this time will be different during the press conference, he said, “What I said at the time was what I meant, which is that this was a one-time proposition.”
He now asserts legislation that keeps most of the cuts in place but not those for the upper-income earners would be “actually removing half the fiscal cliff.”
White House press secretary Jay Carney said the figure, combined with $1.1 trillion in spending cuts already signed into law, would reduce deficits by $4 trillion.
- Pressing business and labor on fiscal cliff (onlineathens.com)
- Obama Says He Won’t Extend Bush Tax Cuts For Wealthiest Americans (huffingtonpost.com)
- Obama urges tax cut extension for all but wealthy; meets with CEOs (bostonherald.com)
- Why Obama should call the GOP’s bluff and go off the fiscal cliff (sfluxe.com)
- What, Exactly, Is the Fiscal Cliff, You Ask? (ritholtz.com)
- Here’s Goldman’s Prediction For What The Fiscal Cliff Deal Ultimately Looks Like (businessinsider.com)