If the “fiscal cliff” takes effect, congressional Republicans would feel pressure to give ground in several areas to achieve their top goal: restoring tax cuts for as many people as possible. That’s why Sen. Patty Murray, D-Wash., and other Democrats have said their party’s leaders should seriously consider letting the Jan. 1 deadline pass and then negotiate with Republicans under sharply different circumstances. Some or most of any new agreements could be made retroactive to Jan. 1, they say.
If Republicans refuse to let tax cuts expire for the wealthy, Murray told ABC’s “This Week,” ”we will reach a point at the end of this year where all the tax cuts expire and we’ll start over next year. And whatever we do will be a tax cut for whatever package we put together. That may be the way to get past this.”
Murray’s allies say voters would blame Republicans for refusing to yield, especially on tax rates, given that Obama won re-election. A recent Pew Research poll supports that view. More than half of the respondents said they would chiefly blame congressional Republicans if there’s no compromise on the fiscal cliff; 29 percent would blame Obama.
It’s questionable whether Obama and Congress’ Democratic leaders would let the government go over the fiscal cliff. Numerous financial analysts say the event would frighten markets, alarm employers and probably trigger a new recession.
However, there’s a school of thought that the cliff is actually a slope, and the economy could withstand the effects of the automatic spending cuts and the renewal of Clinton-era tax rates for at least a few weeks to give time for negotiations to continue. Liberals note that tax rate increases would be felt gradually.