The new fiscal-cliff legislation will add $4 trillion to the government’s debt over the next decade, according to the non-partisan Congressional Budget Office (CBO).
That’s quite a contrast with the White House, which estimates the agreement will reduce debt by about $737 billion, thanks mainly to higher taxes on the wealthy and including $107 billion in interest savings, Politico reports
To generate its estimate, the CBO used its March “current law” baseline, which assumes all of the 2001-03 tax cuts ended Dec. 31. That means the higher taxes to be paid by the wealthy under the new deal don’t count for debt reduction. And the decision to make permanent tax cuts for all but the wealthy counts as adding to the budget deficit.
Not surprisingly, the White House wants to focus on “current policy,” not “current law,” so that the tax increases on the wealthy will count as deficit reduction.
Those who think the CBO’s projections are too harsh also say it should take into account the fact that the budget agreement will help boost economic growth and that the deal could lead to comprehensive tax reform.
Meanwhile, Republicans are beginning to focus on the debt-limit increase that President Barack Obama will have to request soon. "Our opportunity here is on the debt ceiling," Republican Senator Pat Toomey of Pennsylvania told MSNBC.
He says the GOP can use the debt limit as leverage to achieve its budget goals. "We Republicans need to be willing to tolerate a temporary, partial government shutdown, which is what that could mean."
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