Major US Tax, Spending
Decisions Could Hinge on November Elections
July 29, 2012
Unless the U.S. Congress acts, most Americans will pay more taxes next
year to a federal government forced to slash domestic and national
defense spending. Such an outcome would significantly cut the deficit,
but could also damage an already-weak U.S. economy. The November
elections could determine how the nation proceeds.
Last week brought a tantalizing hint of movement in a politically
divided legislature. The Democrat-controlled Senate passed a bill to
retain current tax rates on earnings under $250,000 a year. Democrat
Charles Schumer said, “The House should act immediately so the president
can sign this bill into law.”
But Republicans, who control the House of Representatives, say the
measure will die in the lower chamber. House Speaker John Boehner had a
message for President Barack Obama and congressional Democrats. “Mr.
President, I tell you what: if you want to show that you stand with
American small-business owners, the best thing you can do is drop your
plan to increase their taxes on January first," he said.
Republicans want current tax rates extended for all income levels,
including the very wealthy, whom they describe as America’s job
creators. Senator John Thune said, “The one thing we do not need in the
middle of this kind of an economy is a big, fat tax increase.”
The Senate’s top Republican, Mitch McConnell, summed up his take on the
Democratic agenda by saying, “Taking more money from those who earn it
for the government to waste.”
Democrats counter that allowing the tax rate for top earners to rise
would reduce the severity of automatic spending cuts that will
disproportionately affect poorer and middle-income Americans. President
Obama says America's deficit cannot be eliminated by budget cuts alone.
“I do not believe you can reduce the deficit without asking the
wealthiest Americans, including folks like me, to give up the tax cuts
they have been benefiting from for the last decade," he said.
While Republicans portray themselves as champions of businesses small
and large, Democrats want voters to view them as defenders of a
faltering middle class.
Senator Barbara Boxer said, “Who are you fighting for? Are you fighting
for the people who make a billion dollars a year? That is who the
Republicans fight for. Or are you fighting for the middle class, the
heart and soul of America?”
With neither political party able to exert its will, both are waiting
for the American people to weigh in at the ballot box in November, and
possibly alter the balance of power in Washington.
Political analyst John Fortier, who examines possible outcomes, said,
“If the president is reelected, he will be reelected with at least part
of a Republican Congress, the House and maybe the Senate. We will have
divided government, and many of the same fights we are having today over
the raising of the debt ceiling and other budget differences will
probably be replayed again and again for the next four years.”
On the other hand, a victory by Republican challenger Mitt Romney could
break the gridlock to the benefit of his party’s agenda, assuming
Republicans see further gains in Congress.