WASHINGTON (CBSMiami) – The U.S. is set to go over the much-hyped “fiscal cliff” on January 1 and the intransigency of both parties looks like it will push the country over the edge.
According to the Washington Post, President Obama will veto legislation to block year-end tax hikes and spending cuts unless Republicans finally allow revenue to be raised by raising taxes on the wealthiest Americans.
The position isn’t new, as Obama made a similar statement earlier in the summer, but it would mark a dramatic shift for the president from being more willing to compromise to being more willing to dictate policy from the White House.
It also sets up, what the Post described, as a “dangerous game of chicken over a fiscal even that would raise taxes for nearly 90 percent of households, slice into military and domestic budgets, and possibly spark a brief recession.”
The fiscal cliff, as it’s being called, is the expiration of the Bush tax cuts, the expiration of the payroll tax cut, and the implementation of the so-called sequester, which is set to make deep cuts to defense and domestic spending.
The Senate and White House want to extend the Bush tax cuts for everyone making under $250,000 and let the rates for those making more than that revert to the Clinton-era, when rates were at 39 percent instead of the current 35 percent.
The House of Representatives has refused to approve that and said that either the tax cuts are extended for everyone or no one. The White House and Senate plan would keep rates lower for approximately 97 percent of taxpayers if signed into law.
Republican Speaker of the House John Boehner has said the raising of tax rates on the wealthy is a non-starter and a line the Republican Party will not cross, according to the Post. It’s a eerily similar position the country found itself in when Republicans refused to compromise and sent the nation to the verge of defaulting on its debt last year.
The problem could be compounded for Republicans even if Obama loses to Romney on November 6. If the taxes are allowed to rise to Clinton-era rates thanks to a White House veto or Congressional gridlock, any move to lower the tax rates would blow a hole in the budget deficit, according to the Post.
So, Republicans would then be faced with the option of massively increasing the budget deficit, making deep cuts to all social spending to pay for tax cuts, or maintaining the rates at the Clinton level, all of which would carry serious political danger.