If Republicans refuse to let tax cuts expire for the wealthy, Murray told ABC’s “This Week,” ‘‘we will reach a point at the end of this year where all the tax cuts expire and we’ll start over next year. And whatever we do will be a tax cut for whatever package we put together. That may be the way to get past this.”
Murray’s allies say voters would blame Republicans for refusing to yield, especially on tax rates, given that Obama won re-election. A recent Pew Research poll supports that view. More than half of the respondents said they would chiefly blame congressional Republicans if there’s no compromise on the fiscal cliff; 29 percent would blame Obama.
It’s questionable whether Obama and Congress’ Democratic leaders would let the government go over the fiscal cliff. Numerous financial analysts say the event would frighten markets, alarm employers and probably trigger a new recession.
However, there’s a school of thought that the cliff is actually a slope, and the economy could withstand the effects of the automatic spending cuts and the renewal of Clinton-era tax rates for at least a few weeks to give time for negotiations to continue. Liberals note that tax rate increases would be felt gradually.
“In the first paycheck of the year, people will see that their withholding is up, but it’s not the like the whole amount of their tax bill for the course of the year takes place in their first paycheck. It happens gradually,” said Chad Stone, an economist with the liberal Center on Budget and Policy Priorities.
The second part of the cliff package includes across-the-board spending cuts of $109 billion a year, split equally between military and domestic programs and known in Washington-speak as a sequester.