WASHINGTON (AP) — It’s entirely possible that lawmakers and the White House will reach a deal that staves off an avalanche of tax increases and deep cuts in government programs before a Jan. 1 deadline.
To do so, however, they’ll have to resolve deep political and fiscal disagreements that have stymied them time after time despite repeated promises to overcome them.
For many economists, corporate leaders and politicians, it’s unconscionable to let the government veer over the “fiscal cliff,” which could drain $500 billion from the still-struggling economy next year.
But even President Barack Obama says it could happen.
“Obviously we can all imagine a scenario where we go off the fiscal cliff,” the president said last week. The likeliest cause, he suggested, would be “too much stubbornness in Congress,” especially on the issue of taxes.
Many Republicans in Congress counter that it’s Obama who is too unyielding.
Obama campaigned on a pledge to end the George W. Bush-era tax cuts for households making more than $250,000 a year. Republican leaders say the lower rates from 2001 and 2003 should remain in place for everyone, including the rich.
Both sides have dug in so deeply that it will be politically painful to back down. Republicans say tax increases on the rich would inhibit job growth. Democrats dispute that, and say it’s only fair for the wealthiest to provide more revenue in this era of historically low tax burdens and a growing income disparity between the rich and the poor.
Both parties often talk about cutting spending. But not much happens because constituents demand services they consider important and every government program is important to someone.
Solving the fiscal cliff is daunting, not merely because politicians must make tough decisions to raise taxes and shrink programs; these are the kinds of decisions that can get a candidate defeated. There’s also the magnitude of the unpleasantness needed to make a real dent in deficit-spending after so many years of a government free lunch.