The top Democrat in Congress called Wednesday for a quick solution to Washington's "fiscal cliff" in an upcoming post-election session of Congress.
At the same time, Senate Majority Leader Harry Reid said that asking wealthier people to pay higher taxes needs to be part of any solution to the government's budget woes.
The Nevada Democrat told reporters in Washington he's "not for kicking the can down the road" and that any solution should include higher taxes on "the richest of the rich."
The fiscal cliff refers to the one-two punch of expiring Bush-era tax cuts and across-the-board spending cuts to the Pentagon and domestic programs that could total $800 billion next year, based on Congressional Budget Office estimates.
It's is the most immediate item confronting President Barack Obama and a divided Congress in a post-election lame duck session. Economists say it threatens to push the economy back into recession if Obama and Republicans can't forge a deal to prevent it.
"The vast majority of the American people — rich, poor, everybody agrees — the richest of the rich have to help a little bit," Reid said.
A Congressional Budget Office study in May estimated that the fiscal cliff would force tax hikes and spending cuts totaling over $600 billion in the first nine months of next year — or perhaps $800 billion or so over the entire year if allowed to stay in effect.
The fiscal cliff includes:
- The expiration of Bush-era tax cuts on income, investments, married couples and families with children and inheritances.
- A $55 billion, 9 percent cut to the Pentagon next year and another $55 billion in cuts to domestic programs, including a 2 percent cut to Medicare providers.
- The expiration of unemployment benefits for the long-term jobless and a sharp cut in reimbursements for doctors participating in Medicare.
- The expiration of Obama's temporary 2 percentage point cut in payroll taxes.
- The imposition of the alternative minimum tax on some 26 million households, which would raise their taxes by an average of $3,700.
Some Democrats have called on Obama to propose renewing the payroll tax cut but he has not taken a position.
The election victory has given Obama new leverage in the upcoming showdown with House Republicans controlling over fiscal issues.
But a rejuvenated Obama still confronts a re-elected House GOP majority that stands in powerful opposition to his promise to raise tax rates on upper-bracket earners, although House Speaker John Boehner, R-Ohio, has left the door open for other forms of new revenue as part of a deal to tackle the spiraling national debt.
"The American people have also made clear that there is no mandate for raising tax rates," Boehner said Tuesday night. "What Americans want are solutions that will ease the burden on small businesses, bring jobs home, and let our economy grow. We stand ready to work with any willing partner — Republican, Democrat, or otherwise — who shares a commitment to getting these things done."
The Ohio Republican is scheduled to address the issue Wednesday afternoon.
There are numerous factors under consideration in the upcoming negotiations. Given the time crunch, it's most likely that lawmakers and Obama would seek to forge a deal setting the parameters of tax revenue increases and spending cuts to programs like Medicare and farm subsidies and then require Congress to fill in the blanks next year.
Reid also said he anticipates addressing the need to increase the government's borrowing cap early next year and not in the post-election session of Congress.
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