The ‘Fiscal Cliff’ Crisis: Democratic Versus Republican Proposals

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Some of the major players in the ‘fiscal cliff’ negotiations. Credit: Official White House Photo by Pete Souza

It is not our differences that divide us. It is our inability to recognize, accept and celebrate those differences — Audre Lorde

As Christmas approaches, most Americans spend their time enjoying the comforts of  home: family, friends,  good food and a celebration of the season.

With the new year, they become introspective, pondering the future and what it will hold for them in the next twelve months. In the interminable ‘fiscal cliff’ negotiations, it is the bickering politicians that have now abruptly gone home, leaving all of America nervous about what to expect for the coming year.

2012 may go down as the most confrontational year in American politics in a generation.

The ‘fiscal cliff’ battle lines have been firmly drawn, and battle lines within those lines have also been established.

Etched philosophical positions, unyielding intransigence, and political civil war have subverted the negotiations so far. To understand what it will take to cut a deal, we must first revisit how we got here in the first place.

Fiscal Cliff: The Components

The confluence of spending cuts and tax hikes set to begin starting on January 1, 2013 was artificially and intentionally created by Congress to put a gun to their own heads, forcing themselves to take action to stop the sea of red ink that has besieged the U.S. economy for decades. On that date, and in the months following, the Bush tax cuts expire, sending marginal tax rates back to Clinton-era levels. Automatic spending cuts totaling $1.2 trillion over a ten-year period begin. The Alternative Minimum Tax will impact 32 million Americans in 2013, up from four million in 2012. The 2% payroll tax holiday will sunset. Emergency unemployment benefits will end, as will certain tax credits. Changes to government programs such as Medicare are slated to begin.

With those and other impending effects, coupled with the initial stages of Obamacare starting to take shape, the shock to the economy could be significant. The Congressional Budget Office has projected that the unemployment rate will balloon to 9.1% by the end of 2013, and with that, the economy will sink back into recession, contracting -.3% for the year as a whole. On the plus side, with the combination of higher revenues and reduced spending, the budget deficit is projected to fall by nearly half. There are some who believe that this type of forced medicine is exactly what the U.S. economy needs to begin to get its fiscal house in order — and some of those who believe this reside within the United States Congress.

Congress: Political Philosophies

In addition to the take-your-medicine crowd, there are factions within Congress with starkly divergent viewpoints on the crisis, derived from differing governing philosophies, personal belief systems and/or perceived  attitudes of their constituencies. The divide is most noticeable within the House of Representatives. The Tea Party caucus represents about 60 members (all Republicans) and has a deeply conservative anti-tax platform. The Tea Party is also a subset of a larger group of Republicans (219 at last count) who signed Grover Norquist’s “Taxpayer Protection Pledge” promising not to raise taxes on either individuals or businesses under any circumstances.

The Democrats have far fewer internal schisms, and as the predominant governing party in Washington, would seem to hold the upper hand in negotiations over solutions to avert the ‘fiscal cliff’. As widely reported, Speaker John Boehner eventually put marginal tax increases on the table during the negotiations on individuals making $1 million or more — heretical to both the Americans for Tax Reform as well as the Tea Party. Although both sides were still at odds over specifics, progress seemed to be made toward a middle ground earlier this week. Suddenly, however, negotiations fell apart, a “Plan B” solution advanced by Boehner failed, and Congress went home for Christmas, seemingly further apart than ever before.

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