Business, Economics and Jobs

Congress returns to tackle fiscal cliff


WASHINGTON, DC - NOVEMBER 16: (L-R) House Minority Leader Nancy Pelosi (D-CA), Senate Majority Leader Harry Reid (D-NV), Speaker of the House John Boehner (R-OH), and Senate Minority Leader Mitch McConnell (R-KY) speak to the media at the White House on November 16, 2012 in Washington, DC. The Congressional leaders met with U.S. President Barack Obama to discuss deficit reduction and other economic issues. (Photo by Roger Wollenberg/Getty Images)


Roger L. Wollenberg

Congress returned to work on Monday, facing the challenge of dealing with the so-called "fiscal cliff."

A report released by the White House on Monday predicted economic strain if tax cuts for the middle class were not extended, according to CBS News. The current batch of tax cuts, put in place during the Bush administration, are due to expire in January, with taxes on middle class families set to increase by $2,200 per year.

The report by the Council of Economic Advisers and the National Economic Council said that $200 billion in consumer spending would be lost if middle class tax cuts were not extended.

President Barack Obama has said that any deal on the matter would have to include an increase in taxes on the wealthiest Americans, something that Republicans have rejected to date, according to Agence France Presse.

Obama's plan would keep the Bush-era tax cuts for individuals making less than $200,000 per year and families earning less than $250,000, while raising taxes for the top earners.

More on GlobalPost: The fiscal cliff, explained

Some Republican members of Congress, including Sen. Lindsey Graham of South Carolina, have indicated that they might be willing to let the federal government limit tax deductions and loopholes to increase tax revenue.

"The only pledge we should be making to each other is to avoid becoming Greece. And Republicans should put revenue on the table," Graham said on Sunday, while appearing on ABC News' "This Week."

Graham's statement refers to a pledge Grover Norquist had many congressional Republicans sign that promises no increase in taxes. Sen. Saxby Chambliss of Georgia, a Republican, said last week, "I care more about my country than I do about a 20-year-old pledge," according to ABC News.

Graham said on Sunday, "I will violate the pledge, long story short, for the good of the country, only if Democrats will do entitlement reform," according to AFP.

Sen. Richard Durbin, a Democrat from Illinois, said that wealthy Americans should pay a higher tax rate, according to CBS News. The tax rate for the wealthiest was lowered during the Bush administration to 35 percent.

In addition to the tax hikes, the fiscal cliff scenario also includes $1.2 trillion in spending cuts over 10 years that would automatically go into effect in January.

A CNN poll released on Monday showed that two-thirds of the people questioned felt the US would face a crisis if the country went off the "fiscal cliff." According to the poll, if that happened, Republicans in Congress would likely receive a greater portion of the blame.

Seven in ten of those who responded called for compromise on the issue, but they remained skeptical, with two-thirds predicting that Washington representatives would act like "spoiled children."

More on GlobalPost: Bernanke urges Congress to find fiscal cliff fix