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The Boston Globe

Politics

Some would welcome going over fiscal cliff

Shock to system is one of many ideas in the mix

WASHINGTON — For all the gloom and doom swirling in Washington about a looming fiscal cliff of expiring tax cuts and slashes in government spending, there’s a faint chorus that asserts: Let it happen.

Representative Peter Welch of Vermont, for one, says it might be just what the country needs to find a way out of a quandary of debt, taxes, and lack of political resolve.

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As the country barrels toward the end of the George W. Bush-era tax cuts and automatic budget cuts — which some analysts say could tip the economy back into recession — the White House and Congress say they are eager to find an escape route.

But which way to go?

Welch wants to let the tax cuts expire at the end of the year, as scheduled, then immediately replace them with a series of new tax cuts — not as generous for the rich as the expiring Bush tax cuts — that could allow Republicans and Democrats to return to their districts as tax-cutting heroes while generating new revenue.

“The clock is ticking” on the time left to choose a course that averts the cliff, said Welch, a Democrat. “Unless we do something, it will happen.”

If Congress does not intervene, according to the nonpartisan Congressional Budget Office, the country could head into another recession because of the loss of $600 billion from the economy. Welch’s proposal is just one of several that ease the tough choices posed by the automatic cuts. Outside groups have called for squeezing billions out of Medicare or imposing a new tax on carbon emissions, to raise revenues and help the environment.

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In a new analysis released Thursday, the budget office said the expiring tax cuts and automatic spending cuts would cause the economy to shrink by 0.5 percent next year and unemployment to jump to 9.1 percent by next fall.

On the plus side, though, the federal budget deficit would shrink from $1.1 trillion this year to $200 billion a decade later.

If the Bush tax cuts were extended, according to the study, the country’s gross domestic product would increase by 2.2 percent, and by 3 percent if President Obama’s payroll tax cuts and jobless benefits for the long-term unemployed were also extended. All of the tax breaks are scheduled to expire at year’s end.

“To put the budget on a path that is more likely to be sustainable than if current policies were continued,” the CBO report said, “lawmakers will need to adopt a combination of policies that require people to pay more for their government, accept less in government benefits and services, or both.”

That’s the grand bargain that has been so elusive.

House Speaker John Boehner has expressed a willingness to explore new revenues, but has offered no specific details.

On Thursday, he drew his customary line against an increase in tax rates. “Raising tax rates is unacceptable,” Boehner told ABC News.

“Of course, we’ll talk about it. We talk about all kinds of things we may disagree on,” Boehner said.

To buy more time, Congress and Obama could attempt to temporarily stop the clock by extending the tax cuts for several months and suspend the budget cuts, which is widely believed to be the course that will be ultimately pursued.

“Surely, with all the brain power in Washington, they can come up with some ideas to get this thing resolved,” said Trent Lott, a Mississippi Republican who was Senate majority leader for part of the Clinton years.

“There are those who say we should fall off the fiscal cliff, and that’s one of the most irresponsible things that I’ve heard,” he said.

Obama and Democrats want the Bush tax cuts to remain for families making less than $250,000 and to expire for those making more, which would raise revenues needed to reduce the need for cuts in domestic programs.

Last year, Congress hung a sword of Damocles over itself — automatic spending cuts of $1.2 trillion over 10 years, under a process known as sequestration — to force it to forge a deficit-reduction plan palatable to both sides of the political aisle. It established a special committee, including Senator John Kerry of Massachusetts, but the panel failed to come up with an alternative plan.

“Congress has blinked every time it has been on the threshold of making a deal,” said Welch.

“If we are on the brink of a fiscal cliff happening, and if we blink again,” he said, “we’re going to be sending a very bad signal to the country.”

Welch’s plan isn’t new. Indeed, some Democrats, including Senator Patty Murray of Washington, a member of the Senate Budget Committee, have expressed similar notions — with the political calculus that allowing the Bush tax cuts to expire would give Republicans an incentive to deal.

That’s not going to fool anybody, said Grover Norquist, president of Americans for Tax Reform, who is behind the antitax pledge taken by most congressional Republicans.

“If taxes are raised then cut a little bit, at the end of the day, nobody with a straight face would consider that a tax cut,” Norquist said.

He and other fiscal conservatives have been prodding Congress to permanently extend the Bush tax cuts and spend more time working on fundamental tax reform.

Bobby Caina Calvan can be reached at bobby.calvan
@globe.com
. Follow him on twitter @GlobeCalvan.

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