How will failure of Congress to halt fiscal cliff impact you?
By Miriam Raftery
December 30, 2012 (San Diego’s East County) – If Congress fails to agree by the stroke of midnight on New Year’s Eve, automatic spending cuts of 8-9% across the board will take place as required through sequestration in both domestic programs and Defense. That could cut the deficit by half, but theCongressional Budget office warns this could trigger recession as steep tax hikes take effect along with spending cuts. It’s not just the rich who will feel the pinch—in fact middle class and low income earners would face severe economic impacts.
San Diego's biotech industry, military and Border Patrol offices are all bracing for potential painful cuts.
The deficit currently stands at $1.1 trillion, the lowest since 2008 but still a daunting figure that both sides seek to reduce, but with vastly different approaches.
In an interview today on Meet the Press, President Barack Obama blasted Republicans for their priorities. “"They say that the biggest priority is making sure that we deal with the deficit in a serious way. But the way they're behaving is that their only priority is making sure that tax breaks for the wealthiest Americans are protected," Obama said. "That seems to be their only overriding, unifying theme."
If nothing is done before tomorrow at midnight, expiration of the Bush tax cuts will hike tax rates, damaging the economy and costing the average middle-class family about $2,000, he said.
Speaker John Boehner, Republican leader, insisted that Republicans have been “reasonable and responsible” in opposing the President’s plan. He has not offered specifics on ways to reduce the deficit and protect low and moderate income earners from being hurt if taxes on the wealthy are not increased, however.
Republicans contend that raising taxes on the wealthy could stifle job creation. Democrats counter that tax cuts for the middle class will spur the economy from the bottom up as consumers have more disposable income to spend on goods and services.
New York Times columnist David Brooks backed up the President’s assertions. “"Most of the blame still has to go to the Republicans," Brooks said. "They've had a brain freeze since the election. They have no strategy. “
CNN reports that over two-thirds of poor Americans earning under $20,000 a year will have to pay an average of $590 more in taxes. If you are a middle class worker earning $40,000 to $64,000, expect to shell out near $2,000 more. Those earning over $108,000 will pay a whopping tax hike of almost $13,000.
President Obama has proposed raising taxes only on wealthier people earning over $250,000—a quarter of a million dollars a year. But Republicans have blocked his proposal, refusing even to bring it up for a vote in the GOP-controlled House, even though some Republicans have indicated a willingness to compromise and support the plan. In the Filibuster, which has a Democratic majority, the Republican minority has threatened to filibuster to block the President’s proposal from being heard.
Republicans want spending cuts in social programs, chiefly Social Security and Medicare. Democrats argue this would place too great a burden on those on fixed incomes, working people who have paid into the system all of their lives.
Tax hikes aren’t the only problems poor and middle income earners will face if we go over the fiscal cliff by Congress failing to take action.
Unemployment benefits won’t be extended when they run out in January. Head Start benefits for poor children could be slashed and education could be impacted as well. The price of milk could double as dairy supports expire. Also on the chopping block are such formerly sacred cows as the mortgage income tax deduction. Wind energy projects could also stall since the wind production tax cuts are due to expire.
Washington’s economic uncertainties may also impact the stock market and world financial markets if the crisis is not resolved by year’s end.
If Senate Democratic Leader Sen. Harry Reid and Senate Republican Leader Mitch McConnell cannot reach a deal, Reid is expected to bring President Obama’s bare-boned plan of tax increases for families making more than $250,000 annually and extending unemployment insurance to a vote, Fox News reports.
Republican Sen. Lindsey Graham said today that he believes chances of Congress cutting a deal before the deadline are “exceedingly good.” He also thinks Republicans will ultimately give ground on tax hikes for the wealthy.
“Hats off to the president. He stood his ground. He's going to get tax rate increases,” Senator Graham told Fox News adding that he wants the opportunity to vote for the plan even if it’s not ideal. But he added, “We have accomplished little in terms of not becoming Greece or getting out of debt.”
Democratic Senator Dick Durbin, speaking on Face the Nation, says getting a final hour deal will take “a lot of sweat and a lot of worry.” He added, “What's at stake as far as we're concerned are 98 percent of the American families, working families, and middle-income families, who shouldn't see their taxes go up Jan. 1."