ByÂ Stephen Dinan-The Washington Times
ForÂ Congress, the outlines of the pending fiscal crisis are clear: Donâ€™t do a thing, and watch the economy slip into a double-dip recession early next year. Or cancel the looming tax increases and spending cuts, watch the deficit rise, and push the government ever closer to a European-style debt crisis.
That decision was put in stark terms Tuesday by theÂ Congressional Budget Office, which in a new analysis said the economy will plunge into a recession early next year ifÂ CongressÂ lets taxes rise and spending be cut, as called for under the law.
But ifÂ CongressÂ changes the law to keep taxes low and spending high, it could add more than half a trillion dollars to the deficit in 2013, marking a fifth straight year of trillion-dollar deficits and risking the patience of the countryâ€™s creditors.
TheÂ CBOÂ numbers come just as the debate is heating up on Capitol Hill over how to handle the looming â€œfiscal cliff,â€ whichÂ CongressÂ created by continually pushing off tough decisions on both taxes and spending.
Senate Majority LeaderÂ Harry Reid, Nevada Democrat, signaled Tuesday that he will allow the automatic spending cuts called for in last yearâ€™s debt deal to go into effect â€” culling billions of dollars from defense and domestic spending â€” unless Republicans agree to allow taxes to increase on at least some taxpayers.
â€œIf Republicans want to walk away from the bipartisan spending cuts agreed to last August, they will have to work with Democrats to replace them with a balanced deficit-reduction package that asks millionaires to pay their fair share,â€Â Mr. ReidÂ said.
Republicans remain adamant that the lower income- and investment-tax rates passed in 2001 and 2003 under PresidentÂ Bush, and extended in 2010 under President Obama, must be extended again.
One thing both sides say they agree on, however, is the need to act now.
Last week, House SpeakerÂ John A. BoehnerÂ kicked off the conversation, drawing a line in the sand in saying that he wonâ€™t allow another increase in theÂ federal governmentâ€™s debt ceiling unless itâ€™s matched dollar-for-dollar with future spending cuts â€” just as the 2011 debt deal was.
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