(AP/Pablo Martinez Monsivais)

Is Obama already ceding ground on the "fiscal cliff"?

The White House's warning today about letting the Bush tax cuts expire only plays into Republicans' hands


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Robert Reich
November 26, 2012 9:07PM (UTC)
This originally appeared on Robert Reich's blog.

Why is the White House trying to scare average people about the consequences of the “fiscal cliff?”

If the President’s strategy is to hold his ground and demand from Republicans tax increases on the wealthy, presumably his strongest bargaining position would be to allow the Bush tax cuts to expire on schedule come January – causing taxes to rise automatically, especially on the wealthy.

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So you’d think part of that strategy would be reassure the rest of the public that the fiscal cliff isn’t so bad or so steep, and that at the start of January Democrats will introduce in Congress a middle-class tax cut whose effect is to prevent taxes from rising for most people (thereby forcing Republicans to vote for a tax cut for the middle class or hold it hostage to a tax cut for the wealthy as well).

But today (Monday) the White House’s Council of Economic Advisers issued a report today warning that if Congress allows the Bush tax cuts to expire January 1 and the Alternative Minimum Tax to kick in, the middle class will face sharply-rising taxes.

The result, says the Council of Economic Advisers, could slow consumer spending by 1.7 percent next year, and slow overall economic growth by 1.4 percent. The loss of $200 billion in consumer spending is just about what American families spent on all the new cars and trucks sold in the U.S. in the last year, according to the report. About $36 billion less would be spent for housing and utilities, $32 billion less for healthcare, and $26 billion less for groceries and at restaurants.

This kind of fear-mongering plays into Republican hands.


Robert Reich

Robert B. Reich is Chancellor's Professor of Public Policy at the University of California at Berkeley and Senior Fellow at the Blum Center for Developing Economies. He served as Secretary of Labor in the Clinton administration, for which Time Magazine named him one of the ten most effective cabinet secretaries of the twentieth century. He has written 15 books, including the best sellers "Aftershock", "The Work of Nations," and"Beyond Outrage," and, his most recent, "The Common Good." He is also a founding editor of the American Prospect magazine, chairman of Common Cause, a member of the American Academy of Arts and Sciences, and co-creator of the award-winning documentary, "Inequality For All." He's also co-creator of the Netflix original documentary "Saving Capitalism."

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