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WI: Fiscal Cliff notes — What’s at stake and who’s saying what

By   /   December 6, 2012  /   No Comments

By M.D. Kittle | Wisconsin Reporter

MADISON – Badger State residents face some big questions as the clock ticks down on the looming “fiscal cliff.”

What happens if Congress and President Obama don’t come up with a deal to avoid the double-whammy of expiring tax breaks and automatic, across-the-board federal spending cuts?

What happens ultimately if the powers that be can’t get their stuff together and fix the $16-trillion debt mess they and their predecessors have made?

Don’t expect Barry Alvarez to step in and coach this one, Badger fans.

LONG FALL: Wisconsin taxpayers could lose thousands of dollars and the state’s economy could be out billions of dollars if the U.S. goes over the so-called ‘fiscal cliff.’

On Thursday, Gov. Scott Walker and the Obama administration each weighed in on the economic crisis – Walker noting his meeting with fellow governors and the president this week, the administration pushing Obama’s “middle-class tax plan.”

Here’s what the administration asserts would happen to Wisconsin middle-income earners if Congress and the president can’t resolve their differences:

  • On Jan. 1, income taxes are scheduled to go up for 2.2 million middle-class Wisconsin families, and tax cuts such as the expanded Child Tax Credit, the 10 percent tax bracket, marriage penalty relief, and the American Opportunity Tax Credit all expire.
  • Each American family’s taxes would automatically increase —including the 99 percent of Wisconsin families who make less than $250,000 a year and the 97 percent of American small businesses that earn less than $250,000 a year. A median-income Wisconsin family of four (earning $79,600) could see its income taxes rise by $2,200.
  • The tax increases would have an adverse effect on consumer spending, which makes up about 70 percent of America’s economy. A report released last week by the president’s own National Economic Council and Council of Economic Advisers estimated consumer spending would fall $200 billion nationwide next year, including $3.8 billion in Wisconsin.

The impasse

At the heart of the president’s plan is a tax increase on the nation’s wealthiest citizens.

“To protect the middle class while reducing the deficit, simple math dictates that tax rates must rise on the top 2 percent of taxpayers next year,” Senate Majority Leader Harry Reid, D-Nev., said in a statement. “The sooner Republicans grasp that reality, the sooner we can avoid the fiscal cliff.”

Buoyed by his re-election, Obama has made tax hikes on the rich an imperative while his party has turned away from talk of deeper entitlement cuts – where the big money is. As the Washington Examiner’s Byron York pointed out, “Obama made brief and vague references to cutting spending,” at a Nov.1 campaign rally in Green Bay.

“I’ve signed a trillion dollars’ worth of spending cuts,” Obama said. “I intend to do more.” As York noted, the $1 trillion was a reference to the sequestration cuts agreed to by both parties.

Republican leadership have said it’s willing to eliminate deductions and loopholes to raise revenue, pegged by the GOP at about $800 billion, but leaders say they are dead set against raising taxes on anyone. The irony, of course, is if a deal is not reached, Congress will have raised taxes on everyone.

“The new revenue in the Bowles plan would not be achieved through higher tax rates, which we continue to oppose and will not agree to in order to protect small businesses and our economy,” House Speaker John Boehner and fellow Republicans said in a letter to Obama, referring to a GOP plan reportedly based on a proposal presented by Erskine Bowles, co-chairman of a deficit commission Obama earlier appointed.

“Instead, new revenue would be generated through pro-growth tax reform that closes special-interest loopholes and deductions while lowering rates,” Republicans added.

In short, Republicans want spending cuts — and an emphasis on reductions — to go with any revenue increase.

In the meantime, the partisans push their talking points as the clock ticks.

The following is a partial transcript of Walker’s weekly radio address aptly titled, “The Fiscal Cliff:”

“This week, I had the honor of joining a bipartisan group of Governors to meet with President Obama about the fiscal challenges facing our federal government.

“For more than a decade, the federal government has been spending a lot more money than it has been taking in. Because critical debt benchmarks were surpassed, in the near future our nation is facing what often is referred to as the fiscal cliff. If our federal government fails to take action to avert this fiscal cliff, we could experience a massive economic downturn, which would affect states all across the nation.

“As we look to the federal government in the coming months, I hope we will receive the flexibility necessary to not only help solve the federal deficit, but also provide relief to the states. Compare Washington’s budget problems to what we did here in Wisconsin — we turned a $3.6 billion budget deficit into a surplus and for the first time ever, deposited money in the state’s rainy day fund in two consecutive years.

“I am hopeful politicians in D.C. will be able to solve the fiscal problems facing our federal government so the next generation is not buried under a mountain debt.”

Listen to the full address here

Here’s what the Obama administration had to say about the president’s plan:

“The President believes we must take a balanced approach to reduce our deficit, that’s why he has laid out a balanced $4 trillion deficit reduction plan. On top of the $1.7 trillion in bipartisan spending cuts he already signed (including $1 trillion the Budget Control Act and additional savings through other legislation), the President’s plan cuts entitlement spending by $600 billion while protecting the investments we need to grow the economy, and asking the wealthy to pay a little more. In fact, there are about $2 of spending cuts for every $1 in revenue in the Obama plan.

“This is an important moment not just to avoid the fiscal cliff — but to lay the foundation for an economy that will support a healthy middle-class, restore economic certainty, and lead to long- term job growth.”

Contact Matt Kittle at mkittle@wisconsinreporter.com

— Edited by John Trump at jtrump@watchdog.org

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M.D. Kittle