The Democrats' leverage: Tax increases on everyone

A potent mix of ideology and wishful thinking is blinding them to economic reality. Talking Points Memo’s Brian Beutler reports that Democrats believe “the economic consequences of tumbling over the fiscal cliff won’t really be felt until the election is over” and that “if Congress pulls the country over the fiscal cliff, it can at any point deploy a parachute. It’ll harm the economy, but in a quickly reversible way.”

Former Congressional Budget Office Director Douglas Holtz-Eakin begs to differ. He released a study last week showing that Taxmageddon, and the scheduled spending cuts, would cause a 6 percent drop in gross domestic product, a 2 percent rise in unemployment and 2.8 million more unemployed people.

Asked if the economic effects of Taxmageddon will be confined to 2013, Holtz-Eakin replied, “The fiscal cliff is already having an impact because businesses and families are not blind to the impending spike in taxes. Reports have already indicated that confidence and spending are declining and uncertainty in the tax code is sure to negatively impact businesses’ likelihood to hire in the near term.”