Posted by: Heinz Brisske
On Nov. 16, President Obama met with Congressional leaders of both parties at the White House to open negotiations regarding the issue of the fiscal cliff. Participating in the meeting were Speaker of the House John Boehner (R-OH), Minority Leader Nancy Pelosi (D-CA), Senate Majority Leader Harry Reid (D-NV) and Minority Leader Mitch McConnell (R-KY). The session was the first time in six months that all four leaders had gathered at the White House.
At the meeting, President Obama stated: “My hope is this is going to be the beginning of a fruitful process, that we’re able to come to [an] agreement that will reduce our deficit in a balanced way, that we will deal with some of these long-term impediments to growth and [that] we’re also going to be focusing on making sure that middle-class families are able to get ahead.”
At a press conference after the meeting, both Democratic and Republican leaders described the event as “constructive.” Speaker Boehner and Leader McConnell, both Republicans, suggested a willingness to consider revenue increases. Democratice leader Pelosi indicated that, in her opinion, a compromise on revenue and spending limits could be achieved by Christmas.
Boehner also noted, “While we’re going to continue to have revenue on the table, it’s going to be incumbent on my colleagues to show the American people that we’re serious about cutting spending and solving our fiscal dilemma. I believe we can do this and avert the fiscal cliff that is right in front of us today.”
If no deal is reached by December 31, the “Bush tax cuts” will expire, and tax rates for everyone will increase to the levels they were about a decade ago, before President George W. Bush signed a series of tax cuts. At around the same time, cuts in federal spending, including the military, will be enacted as part of Congress’s budget deal in 2011.
Economists contend such a one-two combination would send the soft economy reeling, leading to job losses and drops in consumer and business spending. The effect would be felt throughout the nation.
If the fiscal cliff occurs, the major effects in 2013 would be to defense ($55 billion reduction), Medicare ($11 billion reduction) and education and other non-defense services ($43 billion reduction).