Political Posturing Reigns as Fiscal Cliff Nears

Monday, 26 Nov 2012 04:06 PM

 

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Republicans in Congress on Monday called on President Barack Obama to detail long-term spending cuts to help solve the country's fiscal crisis, while holding firm against the income tax rate increases for the wealthy that Democrats seek.

The White House has been equally firm in its position, threatening to veto any bill that does not include the tax rate increases opposed by Republicans.

While Congress returned from its Thanksgiving holiday break amid increasing talk about long-term tax reform plans and a need to compromise, the two parties showed no signs yet of having found a way around the short-term tax obstacle necessary to head off the "fiscal cliff" on December 31, which would bring steep mandated tax-rate increases and spending cuts in the new year.

"We remain at an impasse," Senate Republican Leader Mitch McConnell said during a floor speech.

Obama spoke with House Speaker John Boehner about the budget negotiations during the weekend, as well as with Senate Majority Leader Harry Reid, a White House official said. Obama spokesman Jay Carney said the president would speak with them again "at the appropriate time."

The approximately $600 billion in tax hikes and spending cuts that will kick in at the end of the month would push the U.S. economy back into recession, according to the non-partisan Congressional Budget Office.

A new CNN poll found that the public is now closely watching the debate unfolding in Washington over how to tame budget deficits that have exceeded $1 trillion for four consecutive years.

The poll found that two-thirds of those surveyed fear the country would face major problems without a remedy to the fiscal cliff and 77 percent believed their own financial situation would suffer. Republicans would get more of the blame than Obama, according to the survey.

The remedy preferred by two-thirds in the poll was a mix of spending cuts and tax increases to get the country's finances in order.

Seconding that Monday was Warren Buffett, the legendary investor who changed the debate about U.S. tax reform in 2011 with a call for the rich to pay more.

In a New York Times op-ed column printed on Monday, Buffett suggested Congress move immediately to implement minimum taxes of 30 percent on incomes of $1 million to $10 million and 35 percent above that.

SHADES OF 2011

But with Republicans demanding more spending cuts and Democrats insisting on some tax increases, the fiscal cliff negotiations are about where they were in mid-2011, when Obama and Boehner failed to reach a comprehensive deal on deficit reduction.

House Majority Leader Eric Cantor of Virginia, the No. 2 Republican in that chamber, said in an interview aired on MSNBC on Monday, "We were not re-elected to raise taxes or increase marginal rates."

Instead, Cantor said Obama should outline how he would save money on expensive federal entitlement programs that include the Social Security retirement plan and Medicare healthcare for the elderly.

Unlike a handful of Republican members, Cantor, who represents the Richmond, Virginia area, did not disassociate himself from an anti-tax increase pledge sponsored by Grover Norquist and his powerful lobby, Americans for Tax Reform.

As for Buffett, Cantor said his concern was not for billionaires but for "a small-business man or woman in Midlothian, Virginia" who might not invest money and hire people as a result of tax increases.

Senator Jeff Sessions of Alabama, the senior Republican on the Senate Budget Committee, echoed Cantor, saying in an interview that reforming the outdated tax code could stir up new revenues without raising tax rates.

"We need to create growth, which creates jobs, not damaging growth by huge tax increases," Sessions told Fox News.

While Democrats also have talked about a willingness to find savings in the growing costs of entitlement programs, they first want to lock in income tax increases on top earners - families with net incomes above $250,000 a year.

The spending cuts that Republicans are demanding would likely be negotiated next year, not during the few remaining weeks Congress has this year, because of the complexity of revamping the huge entitlement programs.

On December 31, across-the-board tax cuts enacted in 2001 and 2003 under then-President George W. Bush expire. Republicans want all of them to be extended for a year while Congress weighs comprehensive tax reform along with long-term spending cuts.

But Democrats have countered that all of the deficit reductions undertaken in 2011 focused on cutting domestic programs and now it is time for a more balanced approach that would require the rich to contribute to fiscal reforms.

© 2014 Thomson/Reuters. All rights reserved.

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