Congress May Toss the Economy over the Fiscal Cliff
We are barreling towards the year end “fiscal cliff” Federal Reserve Board Chairman Ben Bernanke has warned about.
Unless lawmakers and the President can agree on a slew of confounding budget and tax issues before the end of the year, a double whammy of sharp tax increases and deep cuts in domestic and defense spending will jolt the struggling economy beginning in early January. That’s because two Bush era tax cuts and a raft of other tax relief measures are set to expire by the end of the year, and Congress must implement the first installment of $1.2 trillion of long-term deficit reduction that lawmakers and the White House agreed to last summer.
While an abrupt surge in tax revenues of about $500 billion, and a steep cut in government spending of about $110 billion early next year would certainly put a big dent in next year’s deficit, many budget experts fear it would also undercut the economic recovery in the short run. It would be extremely detrimental to the economy and would have no impact on solvency of the government budget.
Boehner said this week that Congress will be inviting a legislative “train wreck” if it leaves all these big- ticket fiscal issues to a lame duck session of Congress after the November presidential and congressional elections. He revealed plans to schedule a vote on the House floor before the fall election to extend the two Bush-era tax cuts that are very popular with his members. I'm not opposed to extending tax cuts, but I think extending the FICA tax cuts will be much more helpful to the economy and those who are in need then will extending cuts for those who are doing just fine.
