For months, both parties have warned that the country was barreling toward a fiscal cliff of massive tax increases and government spending cuts that would send the economy back into a tailspin unless a compromise was cobbled together before the end of the year.
But in a dramatic turnabout, President Barack Obama and congressional Democrats are signaling that they would rather risk the economy hurtling back into recession next year than accept Republican demands that the Bush era tax cuts be extended for those earning more than $250,000.
Presumptive Republican president nominee Mitt Romney and his fellow conservatives on Capitol Hill insist on extending the tax cuts set to expire for all Americans, including the wealthiest two percent.
Republican control of the House has left Democrats with the choice of either agreeing to continue the lower rates for wealthier Americans, or watching as they all expire and the country plunges back into a downturn. The Democrats would now prefer to hazard the hard landing. Their gambit depends entirely on the danger of a financial shock severe enough to force GOP lawmakers to back down, yet not so overpowering that it triggers a vicious slump.
“I will not agree to a deal that throws middle class families under the bus and forces them to bear this burden alone,” Sen. Patty Murray, a Democratic leader from Washington State, said in a Monday speech at the Brookings Institution. “Unless Republicans end their commitment to protecting the rich above all else, our country is going to have to face the consequences of Republican intransigence.”
Murray noted that tumbling off the fiscal cliff—which the Congressional Budget Office projects would cause a recession for the first half of 2013—would produce millions of lost jobs and cause markets to go haywire. Yet unlike late 2010 when Democrats agreed to extend the tax breaks first passed by President George W. Bush, they claim to be ready to endure the possible fallout.
The speech was delivered less than a week after Obama assured congressional Democrats during a White House meeting that he would veto any attempt to preserve the Bush tax cuts on income over $250,000 a year, the Washington Post reported. Murray’s warning also comes after Senate Majority Leader Harry Reid, D-Nev., dismissed calls from Republicans and some conservative Democrats to blunt deep automatic cuts in the defense budget that are scheduled to take place beginning in early January.
The irony of this unfolding standoff is that the White House and congressional Democrats spent the better part of two years claiming that Republicans were pushing the economy back into the tank by advocating draconian cuts in spending, not to mention a first-ever government default by blocking an increase to the debt ceiling until the final minute last summer.