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Congress Barrels Toward Fiscal Cliff


This is WEEKEND EDITION from NPR News. I'm Rachel Martin.

Here's a term you're going to get really tired of in the next several weeks - if you haven't already: The fiscal cliff. It's a combination of automatic spending cuts and tax increases set to hit at the start of the year. That is, if Congress and the president fail to find a way to avoid it.

NPR's Tamara Keith has this primer.

TAMARA KEITH, BYLINE: Both House Speaker John Boehner and the president made it clear, they don't want to go off the cliff.

REPRESENTATIVE JOHN BOEHNER: And I'm proposing that we avert the fiscal cliff, together in a manner that insures that 2013 is finally the year that our government comes to grips with the major problems that are facing us.

PRESIDENT BARACK OBAMA: I want to be clear. I'm not wedded to every detail of my plan. I'm open to compromise. I'm open to new ideas. I'm committed to solving our fiscal challenges. But...

KEITH: But - and there's always a but. There's a fundamental disagreement between the two men and their parties about how to proceed.

OBAMA: I refuse to accept any approach that isn't balanced. I'm not going to ask students and seniors and middle-class families to pay down the entire deficit while people like me, making over $250,000, aren't asked to pay a dime more in taxes.

BOEHNER: Listen, the problem with raising tax rates on the wealthiest Americans is that more than half of them are small business owners.

KEITH: The president argues the American people support his position, and the exit polls from Election Day back that up. Regardless, if a deal isn't reached there are real consequences. Taxes would go up on almost everyone if the Bush and Obama tax cuts are allowed to expire as scheduled in January, says Roberton Williams of the non-partisan Tax Policy Center.

ROBERTON WILLIAMS: It's a big tax increase on high income people, a big tax increase on low income people, and people in the middle will get squeezed, too.

KEITH: In fact, Williams says 90 percent of taxpayers would see their tax bills rise, with an average increase per household of $3,500 a year.

WILLIAMS: Married couples will see a lower standard deduction. People with children will see a much smaller child tax credit. The high income households will see much, much higher taxes rates on ordinary income, and higher tax rates on their capital gains, and very much higher tax rates on their dividend income.

KEITH: And on the spending side of the ledger, there's what's known as the sequester; more than $100 billion in automatic across the board spending cuts - a trillion over 10 years - also set to start in January. The cuts would be split between defense and non-defense spending with Medicare and Social Security largely protected.

Todd Harrison is a senior fellow at the Center for Strategic and Budgetary Assessments.

TODD HARRISON: The law specifically says, it's a uniform percentage cut across all accounts.

KEITH: In defense, which is Harrison's specialty, it's a 10 percent cut. But he says the amount isn't as much of a problem as the method. Under sequestration, the Defense Department can't choose to eliminate a marginal program to preserve funding for something that's a higher priority.

HARRISON: If you could do it rationally like that you could make a lot better decisions, than just having this uniform across the board cut. But the law doesn't allow that.

KEITH: The same is true in non-defense spending. Under the sequester, education, air traffic control and National Parks are all treated and cut equally.

STAN COLLENDER: Look Ma, no hands theory of budgeting.

KEITH: Stan Collender is a budget guru and a senior partner at Quorvis Communications. He says if the country is allowed to fall off the fiscal cliff, the economy would be sent back into recession.

COLLENDER: This is not a way to run a railroad, let alone to run a country. That is to have a gun to your head or rather to put a gun to your own head.

KEITH: There are seven weeks and counting to figure it out.

Tamara Keith, NPR News, The Capitol. Transcript provided by NPR, Copyright NPR.

Tamara Keith has been a White House correspondent for NPR since 2014 and co-hosts the NPR Politics Podcast, the top political news podcast in America. Keith has chronicled the Trump administration from day one, putting this unorthodox presidency in context for NPR listeners, from early morning tweets to executive orders and investigations. She covered the final two years of the Obama presidency, and during the 2016 presidential campaign she was assigned to cover Hillary Clinton. In 2018, Keith was elected to serve on the board of the White House Correspondents' Association.
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