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Avoiding 'fiscal cliff' - Obama vs. Boehner

10 november 2012, 15:40
0

US President Barack Obama on Friday claimed he has a mandate to hike taxes on the rich, firing his first post-election shot at Republicans in a year-end showdown on debt and spending.
Obama's top Republican antagonist, House speaker John Boehner, set out a rival position, warning that raising taxes would hurt job creation, as fears mounted that the budget imbroglio could trigger a new recession.
"We can't just cut our way to prosperity. If we are serious about reducing the deficit, we have to combine spending cuts with revenue, and that means asking the wealthiest Americans to pay a little more in taxes," he said.
Obama campaigned on raising taxes on the rich to pay for deficit reductions and to finance spending on education and in other areas likely to make the economy more equitable and improve the lot of the hurting middle classes.
He signaled a willingness to deal on the details of a deficit reduction plan, but he made clear that his bottom line principle involved rejecting the Republicans' flat refusal to agree to higher taxes for the wealthy.

Barack Obama

US President Barack Obama speaks on the economy in the East Room of the White House in Washington, DC on November 9, 2012. Obama made his first post-election intervention in a brewing year-end budget and spending crisis, laying out his position in a televised statement ahead of intense bargaining with Republicans. ©AFP/Nicholas KAMM

"This was a central question during the election, it was debated over and over again. On Tuesday night, we found that the majority of Americans agree with my approach," an invigorated Obama said in the White House briefing room.
"I want to be clear. I'm not wedded to every detail of my plan. I'm open to compromise. I'm open to new ideas."
With Vice President Joe Biden, likely to play a key role in negotiations, by his side, the president warned: "I refuse to accept any approach that isn't balanced."
"I'm not going to ask students and seniors and middle class families to pay down the entire deficit while people like me making over $250,000 aren't asked to pay a dime more in taxes. I'm not going to do that."

Republican House Speaker John Boehner, who will be Obama's ultimate opposite number in fiscal cliff negotiations, said Friday that the onus for averting the crisis lay with the president.
"I'm proposing we avert the fiscal cliff together in a manner that ensures that 2013 is finally the year that our government comes to grips with the major problems facing us," Boehner said.
But he reiterated his opposition to raising taxes on the wealthy as a way to slice into America's growing debt, saying "raising tax rates will slow down our ability to create the jobs that everyone says they want."
Boehner pointed to "special interest loopholes in the tax code, both corporate and personal," as well as deductions that could be eliminated as a way to raise revenue while not deterring investment.

John Boehner

House Speaker John Boehner (R-OH) makes remarks on Capitol Hill on November 7, 2012 in Washington, DC. Boehner discussed the looming fiscal cliff and called on President Obama to work with House Republicans. ©Brendan Hoffman/AFP

But Boehner, like Obama, declined to go into great detail of his proposal, apparently seeking to avoid becoming boxed in ahead of the negotiations.
Boehner has made clear that a comprehensive long-term plan for debt reduction was unlikely in the next seven weeks of the outgoing "lame duck" Congress, but that a short-term compromise could be achieved.
That was a challenge to Obama, who has previously opposed calls for a short-term fix that would just mean "kicking the can down the road."
The House leader has tried to appear conciliatory given Obama's cruise to victory in the election over Republican Mitt Romney, which replenished the president's political capital.
But Boehner sits atop a restive coalition of ultra-conservative Republican lawmakers and faces a tough sell in any deal that eventually includes any kind of tax hikes -- or "increased revenues" in government parlance.

The non partisan Congressional Budget Office warned this week that if the fiscal cliff is not averted, unemployment would rise to 9.1 percent from the current 7.9 percent by the end of next year.
Obama's approach left room for negotiation with Republicans and could possibly permit a compromise that keeps the top level of income tax rates the same for the rich, but involves a removal of deductions on investment income.
But the White House said that the president would veto any bill that came to his desk that meant an extension of the George W. Bush era tax cuts for the two percent of Americans earning more than $250,000 a year.
The president urged Congress to immediately send him a bill however to extend the same Bush-passed tax cuts on those earning less than $250,000.

Next week's talks at the White House will involve Boehner, Senate Republican minority leader Mitch McConnell, Democratic Senate Majority leader Harry Reid and House Democratic minority leader Nancy Pelosi.


The "fiscal cliff" is a combination of dramatic spending cuts and tax increases mandated to take effect beginning January 2013 if Democratic and Republican US lawmakers cannot bridge their differences on how best to reduce the nation's budget deficit and debt.

WHAT IS IT?

The Budget Control Act of 2011, set into law in a grudging political compromise in August that year, forces the government to slash spending by $1.2 trillion over 10 years from January 1, 2013. Next year's cuts, called "sequestration", would be about $109 billion.

Also on that date, a package of tax reductions set or extended in 2010 to spur economic growth, as well as an extension of unemployment benefits, will expire, meaning taxes will rise significantly for most Americans.

WHY WILL THIS HAPPEN?

Democrats and Republicans have long been deadlocked over whether to address a $1 trillion-plus annual budget gap with higher taxes or lower spending.

The BCA was a poison-pill deal designed to force them to find a less austere compromise, but neither side would budge before the November 6 election. Now that the vote has passed, they only have a few weeks to find a solution to beat the year-end deadline.

WHAT HAPPENS IF THE CLIFF IS NOT AVOIDED

Together the higher taxes paid and lowered spending could slice the $1.1 trillion deficit racked up in fiscal 2012 (ended September 30) by almost $500 billion next year, according to the Congressional Budget Office, vastly improving the government's financial picture.

But the CBO estimates the shock treatment would send the country back to recession and push the unemployment rate to 9.1 percent.

Deep cuts would come to both defense and non-defense spending. Government suppliers and contractors would lose business, and temporary furloughs could be in store for tens of thousands of federal employees.

Taxes and automatic paycheck deductions would increase for most Americans, reducing the cash they have for spending, and taxes on capital gains and dividends would rise, hitting investors.

 

Source: AFP


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