Casey says fiscal cliff talks in 'early stages'
WASHINGTON — Sen. Bob Casey Jr. believes lawmakers will reach a deal to solve a budget and tax stalemate that could trigger a recession but says talks are still “in the early stages.”
“I think we're going to be here for a while,” Casey said after a hearing Thursday on the so-called fiscal cliff, more than $500 billion in tax hikes and spending cuts scheduled to take effect the first of the year.
Economists warned Casey, D-Scranton, during a joint House-Senate committee hearing on Capitol Hill that failing to avoid the cliff would send the economy reeling.
The GOP House majority, behind Speaker John Boehner, and Democrats supporting President Obama remain deadlocked.
Republicans and Democrats are split on whether to raise the marginal tax rate for those making more than $250,000 a year. Casey, chairing his final hearing of the Joint Economic Committee, noted there's near-universal agreement on extending Bush-era tax cuts for those making less than $250,000.
“If we get the House to do what they should do, we can give people a measure of certainty right now, literally the moment it passes — in terms of their holiday shopping, in terms of the decisions they make about their spending in this calendar year,” Casey said.
Obama proposed increasing taxes by $1.6 trillion through higher marginal tax rates on the wealthy and by eliminating tax deductions. Boehner, R-Ohio, repeatedly has rejected an increase in rates. Republicans say raising taxes on those who have money to invest will slow job growth.
“Rather than taking an extreme (position) that's very harmful and that you know the other side can't accept, what you do is you look for areas where the other side can meet you halfway,” said Sen. Pat Toomey, R-Lehigh Valley, a member of the committee.
If a deal isn't reached, “I think you've got about a month” to find a compromise before the economy starts to sour, economist Mark Zandi said during the hearing. “By mid-February, (the cuts and tax hikes) would be doing a lot of damage.”
The economy would swing from a growth rate of 2 percent to a contraction of 1.5 percent, said Zandi, chief economist at Moody's Analytics.
It's a delicate, contentious balancing act for lawmakers. Focus too much on cutting the deficit immediately, and the economy suffers in the short term because of higher taxes and a lack of spending. If lawmakers put off the debt debate they'll just postpone the pain, said Kevin Hassett, director of economic policy studies at the American Enterprise Institute.
While arguing over the year-end deadline, Republicans and Democrats began positioning themselves for the coming fight over raising the debt ceiling, which probably will be necessary early next year. The last debt ceiling debate, in July 2011, lasted until hours before the country would have defaulted for the first time.
Casey said Congress should eliminate the debt ceiling altogether.
Republicans say the debt ceiling question forges a valuable tool for forcing spending debates that otherwise wouldn't occur. The Budget Control Act, which forced Congress to choose between compromising on deficit reduction or sending the country over the fiscal cliff, came out of the 2011 debt ceiling negotiation, said Sen. Dan Coats, R-Ind.
“It's a mistake to put the revolver to your head on a regular basis,” Zandi said. “And that's what we're setting ourselves up for with the current law.”
Mike Wereschagin is a staff writer for Trib Total Media. He can be reached at 412-320-7900 or firstname.lastname@example.org.