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Old 11-09-2012, 11:02 PM   #1
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Default The Fiscal Cliff

The Background:
“Fiscal cliff” is the popular shorthand term used to describe the conundrum that the U.S. government will face at the end of 2012, when the terms of the Budget Control Act of 2011 are scheduled to go into effect.

Among the laws set to change at midnight on December 31, 2012, are the end of last year’s temporary payroll tax cuts (resulting in a 2% tax increase for workers), the end of certain tax breaks for businesses, shifts in the alternative minimum tax that would take a larger bite, the end of the tax cuts from 2001-2003, and the beginning of taxes related to President Obama’s health care law. At the same time, the spending cuts agreed upon as part of the debt ceiling deal of 2011 will begin to go into effect. According to Barron's, over 1,000 government programs - including the defense budget and Medicare are in line for "deep, automatic cuts."
President Obama's Stance:

Washington (CNN) -- Flush with re-election vigor, President Barack Obama called Friday for House Republicans to immediately pass a bill already approved by the Senate that would maintain current tax rates for middle-class Americans while increasing taxes of wealthier citizens.

In his first public comments since winning Tuesday's vote, Obama expressed openness to negotiate with Congress on how to deal with pending tax hikes and spending cuts that create the so-called fiscal cliff facing the economy at the end of the year.

However, he also repeated his longstanding demand that Republican opponents to any kind of tax increase relent to the will of the White House and the Senate -- and now the American people -- in letting tax rates increase on income over $250,000.

Nobody in either party wants the middle class, identified as families making less than $250,000 a year, to see taxes increase at the end of the year when lower rates set during the administration of former President George W. Bush will expire, Obama said.

"That makes no sense. It would be bad for the economy," he told a White House gathering of what aides described as middle class Americans. "Let's extend middle class tax cuts right now. Let's do that right now. That one step would give millions of families, 98% of Americans, 97% of small businesses, the certainty that they need going into the new year."

Noting the Senate previously passed a bill to extend the tax cuts to the middle class, but not income over $250,000, Obama said: "All we need is action from the House."

"I've got the pen," he said, reaching into his pocket to hold one up as the crowd applauded. "I'm ready to sign the bill right away. I'm ready to do it."
House Republican Leader John Boehner:
Boehner: Raising Tax Rates 'Unacceptable'

Raising tax rates is "unacceptable" to House Speaker John Boehner as he prepares to open negotiations on the looming "fiscal cliff" with the president and congressional Democrats, he told "World News" anchor Diane Sawyer today in an exclusive interview.

"Raising tax rates is unacceptable," Boehner, R-Ohio, said in his first broadcast interview since the election Tuesday.

"Frankly, it couldn't even pass the House. I'm not sure it could pass the Senate."

That stance could set up a real showdown with the White House given that the president has said he would veto any deal that does not allow tax cuts for the rich to expire. But the speaker said that Republicans would put new tax revenue on the table as leaders work toward a deal.
The exit polls from the election indicate that 60% of voters agree that taxes should be raised (13% saying for all Americans, 47% saying only for those earning $250K+) as opposed to 35% who say no tax hikes should be imposed. It's clear that the vast majority of Americans are smart enough to realize that we cannot cut the deficit in any effective way without raising taxes (and obviously spending cuts).

The Bush tax cuts are set to expire for everyone in January anyway so Boehner and co. have no legs to stand on. Also, if it turns out a deal isn't reached before the end of the year and we are plunged into another terrible recession for the sole reason that the Republicans in the house didn't want to raise taxes on millionaires and billionaires by a few percentage points will make the past election look like a walk in the park compared to what is coming for that party in Congress.
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