As the country inches ever closer to the fiscal cliff, politicians are getting closer to spending New Year’s Eve at work hammering out a resolution. For those who have somehow escaped the phrase- “fiscal cliff” refers to a frightening combination of tax increases and budget cuts scheduled to take affect at the start of 2013. At the center of the debate is what to do about tax cuts implemented during President George W. Bush’s term. Democrats want tax cuts extended for the middle class, but expired for high earners. Republicans are adamantly opposed to any major tax increases, specifically a full expiration of the Bush- era cuts, which would increase tax rates on income over $250,000 from 35 percent to 39.6 percent.
Republicans and Democrats have been working for weeks to develop a plan both parties can stomach, but little progress has been made. House Speaker John Boehner and the President recently had a “blunt” 30 minutes conversation during which the president insisted taxes must go up on incomes above $250,000. This is something Republicans are unwilling to accept. Soon after this talk, Treasury Secretary Timothy Geithner presented a plan to lawmakers that House Republicans characterized as a joke. Senate Republican Leader Mitch McConnell, referred to it as a "step backward, moving away from consensus and significantly closer to the cliff, delaying again the real, balanced solution that this crisis requires." Statements like this prompted White House spokesman Josh Earnest to report “the only thing preventing [Congress and the White House] from reaching a deal is the refusal of Congressional Republicans to ask the very wealthiest individuals to pay higher tax rates.”
Republicans insist it is more complicated than a simple stubbornness to raise taxes on rich people. The Speaker’s office cited lack of Senate support as a major concern and a reason the plan is unacceptable. Several months back, the Senate struggled to pass $8 billion in tax increases- and Geithner’s plan calls for twice that amount. Time is ticking away, and if the White House plan cannot pass the Democrat-controlled Senate, they argue, it will do nothing to avert the cliff. Republicans advocate retaining the debt limit and cutting new areas of spending.
President Obama took a hiatus from the bickering by heading to the K’NEX manufacturing facility in Montgomery County, where he received 57 percent of the vote, to garner public support for his argument for Congress to act quickly to protect the tax rates of middle class families. Extending these tax cuts now will alleviate stress on the middle-class and therefore stimulate the economy by encouraging consumers to spend more this holiday season- on toys- and other products, according to the President. This is important because businesses like K’NEX, which has recently brought much of its manufacturing back to the US from China, rely on holiday spending to compensate their workers- more middle class Americans- and pay their bills.
Meanwhile in Washington, the clock continues to tick…