Come January, the nation faces a massive combination of automatic tax increases and across-the-board spending cuts that have come be known as the “fiscal cliff” because allowing this scenario to play out would probably send the economy back into recession, according to government economists.
Lawmakers and the White House are working in a postelection session of Congress to reduce the sudden jolt of higher taxes and spending cuts and lay a framework for addressing the nation’s long-term financial problems. But the two political parties are struggling to find common ground, especially on taxes and widely popular benefit programs such as Social Security and Medicare.
Obama wants to let tax rates rise for wealthy families while sparing middle- and low-income taxpayers. Some Republican leaders, including House Speaker John Boehner of Ohio, have said they are willing to consider making the wealthy pay more by reducing their tax breaks. But most Republicans in Congress adamantly oppose raising tax rates.
If the wealthy are going to put out more tax money one way or another, it may not matter much whether they do so by paying a higher rate or by seeing their tax shelters shrink. But most of those tax breaks have some broader policy purpose behind them. In Washington, lobbyists are paid handsomely to focus on seemingly small details like that and lawmakers are perfectly capable of getting tied in knots over them.
Advocates for older people are warning the negotiators to keep their hands off Social Security, Medicare and Medicaid. “We didn’t put out the resources that we did to elect the president and others to have them turn around and cut these programs,” said Eric Kingson, co-director of the Strengthen Social Security Coalition, a group of more than 300 advocacy groups and labor unions.