WASHINGTON — So just how rough is the fall off the so-called fiscal cliff?
Sen. Mike Johanns, R-Neb., pointed to expert predictions that the scheduled expiration of George W. Bush-era tax cuts and the imposition of automatic budget cuts could send the country into recession.
But Sen. Tom Harkin, D-Iowa, downplayed that possibility and suggested that Democrats would be better off holding out for a good deal from Republicans.
Harkin described the fiscal cliff as more of a “fiscal slope,” saying the financial markets won't go into meltdown because traders know the issue will eventually be solved.
He cited recent comments by Omaha investor Warren Buffett that the economy is strong enough to withstand the fiscal cliff without tumbling into recession.
Harkin has been collecting signatures from colleagues on a letter calling for rejection of any deal that would hurt American working families.
Senate Majority Leader Harry Reid, D-Nev., will deliver the letter to President Barack Obama today, when the president meets with congressional leaders from both parties at the White House, Harkin said.
“We must not rush into a bad deal that would have severe long-term consequences for the economy and for the middle-class,” Harkin said.
Democrats such as Harkin want to allow the tax cuts to expire for the wealthy and protect entitlement programs such as Medicare and Medicaid.
No deal is better than a bad deal, Harkin said.
“I'm hopeful that we can have something in place and we can get something done before the end of the year,” Harkin said, “but if we don't, well then we'll take it on next year.”
But Johanns said Congress must act to stop what would amount to a massive tax increase and devastating budget cuts, particularly to the military.
“Those who have looked at this, including the Congressional Budget Office, say very plainly — if we don't solve this problem then we go into recession,” Johanns said. “The economic recovery is very fragile and going over the cliff has consequences, and I just have always had the attitude (of) don't play chicken on these kinds of issues.”
He singled out a pending increase in the estate tax as a hurdle for farming operations.
“This will be financially devastating not only for the average taxpayer but for our No. 1 industry, which is agriculture,” Johanns said. “This is real.”
He said that while a “grand bargain” encompassing long-term budget changes is necessary, there isn't enough time to get that done before the end of the year.
Therefore, he supports some type of bridge measure that would push back the cliff and buy Congress some time to tackle the issue.
Johanns is a member of the bipartisan Gang of Eight, which is seeking broad solutions to the country's budget woes. The group has been holding formal and informal talks on the issue since returning to Capitol Hill, but Johanns said not to expect any imminent proposals.
He said he wants to be careful not to interfere with the coming talks between congressional leaders and the White House.
“I don't want to do anything that would put the president in a difficult spot or to put (House Speaker) John Boehner in a difficult spot,” Johanns said.
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