Politicians have yet to reach agreement on budgetary policy
President Barack Obama speaks in Washington, Wednesday, Nov. 28, 2012, about how middle class Americans would see their taxes go up if Congress fails to act to extend the middle class tax cuts. (Pablo Martinez Monsivais/AP Photo)
by Artur Tofan
Washington returns to work after Thanksgiving to continue negotiations over one of the hottest issues on the table, the so-called “fiscal cliff.” President Obama along with Congress has one month left to work until the fiscal cliff policies are scheduled to take effect and the outcome will likely impact most Americans.
A report by the Council of Economic Advisers and the National Economic Council says taxes on middle-class families will go up $2,200 per year if current tax rates expire and that $200 billion of consumer spending revenue will be lost.
“The government is on automatic pilot to the fiscal cliff, to massive tax increases and really to the horrible spending cuts on January 1, 2013 unless we act,” said Connecticut Senator Joseph Lieberman. “If the Congress does nothing, which Congress has gotten pretty good at doing these days, we’ll go over the fiscal cliff,” said Lieberman while discussing the looming fiscal situation on CNN’s “State Of The Union.”
If Washington does not reach a consensus by midnight on December 31, 2012, a major provision of the Budget Control Act of 2011 is scheduled to go into effect. This was the deal signed by President Obama in August 2011 to end the Congressional battle over raising the government debt ceiling. The act was a compromise between Democrats and Republicans regarding economic policies while temporarily increasing the debt ceiling—the amount of money the government could borrow to pay its bills.
Economists have warned that the combination of increased tax rates and across-the-board spending cuts set to go into effect on January 1 threaten to send the United States into a recession. While President Obama and members of Congress have entered negotiations to avoid the cliff, Republicans and Democrats have yet to reach an agreement.
Both sides agree that federal spending can and must be reduced, but the major problem has been getting Republicans and Democrats to agree on budgetary policy for the future. Republicans say they want cuts in government spending to reduce the country’s deficit without raising taxes. Obama and congressional Democrats have pledged to let the Bush-era tax cuts for the country’s top earners expire.
But so far, there is no consensus on what to do, and some analysts say nothing may happen to avoid the fiscal cliff until the last week in December. Even though gridlock has been the order of business in recent years in Washington, Congress always seems to act when there is a deadline.
“Let me just join in the general hopefulness that we’re going to avoid the fiscal cliff. But it’s not a done deal and it’s not a certainty,” said Lieberman while commenting on the need for flexibility as negotiations go forward. “There’s work to be done and compromises to be reached,” he said.