Tags: Bowles | Fiscal | Cliff | economy

Erskine Bowles: Now is ‘Magic Moment’ to Resolve Fiscal Cliff

Tuesday, 13 Nov 2012 11:14 AM

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The country's leadership needs to act right now to avoid a fast-approaching fiscal cliff that could knock the economy into a recession next year, said Erskine Bowles, co-chairman of President Barack Obama's National Commission on Fiscal Responsibility and Reform and a former Chief of Staff under President Clinton.

At the end of this year, a string of tax breaks and benefits is set to expire right at the very same time that automatic cuts to government spending are scheduled to kick in.

The combination of tax hikes and spending cuts could siphon over $600 billion out of the economy next year alone, enough to tip the country into a recession if Congress fails to address the issue.

Editor's Note: The Truth About the Economy — Government Documents Lead to Eerie Conclusion

In recent elections, voters sent Obama back to the White House and left Democrats in control of the Senate and Republicans in control of the House of Representatives, basically opting for no change in the nation's leadership structure.

Now is the perfect time for policymakers to put politics aside and strike a deal. "I think this is truly the magic moment," Bowles told CNN.

"We've got a second-term Democratic president who is willing to put entitlements on the table. We've got a Republican speaker who really gets it, who understands the dangers we face and is willing to put revenue on the table," Bowles added, referring to tax hikes.

One sticking point is found in taxes, with Democrats clamoring for allowing the Bush-era tax cuts to expire for wealthier Americans, a move some Republicans have said would hurt job creation since many who would get hit by higher taxes are small-business owners.

House Speaker John Boehner and other Republicans have hinted, however, that they'd support hikes to government revenue provided entitlement reforms are addressed.

"We've probably got as many as 50 members in the Senate, [an] equal number of Republicans and Democrats who are for a balanced plan," Bowles told the network.

"But most importantly, what we have, we have this fiscal cliff, this crisis, which really will create chaos if we go over the fiscal cliff and we don't immediately get a deal thereafter."

Investors remain worried over the possibility that partisan bickering and brinkmanship will hold up decision making similar to the debt-ceiling debacle in 2011, when lawmakers agreed at the very last second to raise the country's spending limit and narrowly avoided default.

The U.S. saw it's coveted triple-A rating stripped by Standard & Poor's anyway.

"At the very least, I would like to see some kind of conciliatory rhetoric on both sides of the aisle to give investors assurance that a grand deal is coming," said Jack Ablin, chief investment officer at Harris Private Bank, according to Reuters.

Editor's Note: The Truth About the Economy — Government Documents Lead to Eerie Conclusion

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