A new report by the Congressional Budget Office (CBO) concluded that if the Bush-era tax breaks and looming spending cuts are not dealt with before the New Year, we will fall off the so-called “fiscal cliff” and end up with a jobless rate of 9.1 percent by next fall along with a shrinking economy.
Fox News is reporting that the President has little time to bask in his election victory with a serious fiscal crisis looming over his head unless he acts soon. The most he’s done about it so far is to announce a framework for talks, but with both parties diametrically opposed on the issues at hand, a resolution will require far more than “guidelines.”
Adding even more urgency to the problem is a new Congressional Budget Office report released last Thursday which found that the combination of automatic tax increases and spending cuts — would cut the deficit by $503 billion through next September, but the resulting fiscal austerity would cause the economy to shrink by 0.5 percent and cost millions of jobs.
“The potentially economy-crippling set of tax increases and automatic spending cuts is due to hit in January unless congressional leaders can overcome a key impasse,” Fox reports. “Democrats continue to demand that the Bush-era tax rates lapse for those making $250,000 and up. Republicans continue to insist on keeping tax rates stable for everyone.”
Republican House Speaker John Boehner has said he’s willing to accept new tax revenue, but only if it comes from closing loopholes and other reductions and is accompanied by serious entitlement cuts.
“Raising tax rates is unacceptable,” Boehner told ABC News. “Frankly, it couldn’t even pass the House. I’m not sure it could pass the Senate.”
The current situation forces Obama to make some tough decisions. Does he stand firm with Democrats in demanding tax increases for those making more than $250,000, or does he reach across the aisle and compromise? Democrats are hoping he stands firm while Republicans say a fight could poison efforts to bridge an already bitterly divided Congress and will threaten the president’s second-term agenda.
While some analysts believe we could survive a plunge over the fiscal cliff in the short run, it would rattle financial markets and cause delays in tax filings and refunds.
A long and rancorous election has left America divided and at least half of the population discouraged and anxious about the future. Now is the time to remember the words of Pope Benedict XVI in his encyclical Populorum Progressio (Development of Peoples)
“Justice must be applied to every phase of economic activity, because this is always concerned with man and his needs,” he writes. “Locating resources, financing, production, consumption and all the other phases in the economic cycle inevitably have moral implications. Thus every economic decision has a moral consequence.”
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