December 20, 2012
News
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Democrats, Republicans work to solve fiscal cliff Fiscal cliff negotiations began November 29 as President Barack Obama offered an opening bid in the effort to pass legislation to avoid serious financial consequences. Obama originally proposed $1.6 trillion in tax increases, $400 billion in spending cuts, and $200 billion in a new stimulus for the economy. The White House’s plan would reduce the deficit by an estimated amount of $2.4 trillion. On December 3, Speaker of the House John Boehner and other House Republican leaders sent Obama a counter offer. The counter offer consisted of $800 billion in new tax revenue (through limiting loopholes and deductions, rather than raising taxes), $900 billion in cuts from mandatory government spending, and $300 billion in discretionary cuts. The plan would raise the age of Medicare eligibility from 65 to 67 in the next decade and reduce Social Security costof-living adjustments. This plan, when measured the same way as the White House’s opening bid, would reduce the deficit by $4.6 trillion. Obama rejected the counteroffer because it did not include an increase in tax rates for the top two percent of Americans. Obama and Boehner met on the afternoon of Sunday, December 9, at the White House to further discuss
resolving the fiscal cliff. Both sides released an identical statement regarding the meeting, indicating that the lines of communication were open. After the meeting, Obama proposed a new plan of reducing the increase in tax revenue from $1.6 trillion to $1.4 trillion. Republicans offered a counter on Tuesday, December 11, but have not released all its details publicly. On December 15, Politico reported that Boehner proposed raising tax rates on people making over $1 million. House Democratic Leader Nancy Pelosi called for a vote on a bill that would let current tax rates expire for households making more than $250,000 and extend the current tax rates for everyone else. This would effectively raise taxes on Americans making more than $250,000. The term “fiscal cliff” refers to the $500 billion in tax increases and $200 billion in spending cuts that are scheduled to take effect January 1, 2013. The Congressional Budget Office predicts that if all of the changes take effect, the economy will be thrown into a recession in 2013 and unemployment rates will also increase. The deep divide between the Democratic and Republican parties has contributed to the many proposals and counter-proposals. Both parties agree that doing nothing
about the crisis is a bad idea and that across-the-board cuts are harmful. Both sides concur that a deficit plan should be passed to bring down the long term deficit and should include both tax revenues and entitlement cuts. However, Democrats and Republicans do not agree on taxes and what spending to cut. Democrats want to raise taxes on the wealthy, primarily those making more than $250,000 a year. Republicans are against tax increases in general but prefer raising revenue by closing tax loopholes and limiting deductions. Republicans also want to reform entitlement programs and cut more discretionary spending. Each party accuses the other of being too vague in its proposals. Republicans want Democrats to give more details on the spending cuts they propose and Democrats want Republicans to detail which deductions they plan to eliminate. The Republican party is also divided internally. Most Republicans are opposed to raising taxes and prefer not to increase any type of revenue. Some suggest that the Republican party should let Obama pass his tax increases and focus on cutting entitlements. Although the tax increases and budget cuts take effect January 1, it is doubtful that progress will be made by Congress and the
House Speaker John Boehner walks to a news conference after his meeting with President Obama on December 11. AP Images President before Christmas. Senate Democratic Leader Harry Reid said it would be “extremely difficult” to reach a budget deal by December 25 since once a deal has been made, it takes time to move it through both chambers of Congress. The House Majority Leader, Republican Eric Cantor, said that the Republicans would work “until Christmas Eve and even the time between and before the new year” to avoid going over the fiscal cliff at the end of the year. Meanwhile, Pelosi disagreed with Cantor and instead argued that members of Congress should return home for Christmas. As the new year approaches, the fiscal crisis will deepen as lawmakers attempt to reach agreement. Carolina VonKampen Copy Editor