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Don’t fear fiscal cliff, says Democrat
A leading Democratic senator has said her party should be willing to go off the fiscal cliff in order to secure tax rises on the wealthy, raising the stakes in year-end budget negotiations.
“If the Republicans will not agree with that, we will reach a point at the end of this year where all the tax cuts expire and we’ll start over next year,” said Patty Murray, who was co-chair of last year’s deficit supercommittee, on ABC’s This Week. “And whatever we do will be a tax cut for whatever package we put together. That may be the way to get past this.”
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The Washington senator is one of the most senior figures from either party to suggest that temporarily going off the fiscal cliff could be an acceptable way to break the impasse over fiscal policy. Her hard line could strengthen the negotiating position of Democrats but frighten markets.
The fiscal cliff refers to tax rises and spending cuts planned for the end of year. If this happens, tax cuts passed by former president George W. Bush would expire and there would be across-the-board cuts to defence and other spending.
That could push the US into recession, although some analysts think it would not be too damaging if some of the cuts and tax rises were quickly reversed. Republicans want to keep all of the Bush tax cuts while Democrats want to keep them only for those with incomes below $250,000.
Going off the cliff would have the political advantage of letting Congress vote for tax cuts, after they go up automatically at the end of the year, rather than voting for tax rises now.
Saxby Chambliss, the Republican senator for Georgia, said that higher revenues should be on the table but as part of a tax reform rather than an immediate increase in rates.
“We need to consider the fact that the folks who [the president is] talking about raising taxes on are the job creators, the small business community,” said Mr Chambliss. “So there’s a right way to do this and there’s a wrong way to do it.”
But there were signs that Republicans are backing away from a head-on confrontation over the Bush tax cuts on higher incomes. Bill Kristol, the influential editor of the conservative Weekly Standard, said the party should consider taking the fiscal deal proposed by President Barack Obama.
“I don’t really understand why Republicans don’t take Obama’s offer to freeze taxes for everyone below $250,000, make it $500,000, make it $1m,” said Mr Kristol on Fox News Sunday. “Really? The Republican party is going to fall on its sword to defend a bunch of millionaires, half of whom voted Democratic and half of whom live in Hollywood?”
Cover from conservatives such as Mr Kristol could make it easier for Republicans in Congress to do a deal. “Let’s have a serious debate,” said Mr Kristol. “Don’t scream and yell if one person says ‘You know what? It won’t kill the country if we raise taxes a little bit on millionaires.’ It really won’t, I don’t think.”
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