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BACK TO BUSINESS: Averting “Fiscal Cliff” Next Priority for Obama and Congressional Leaders

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“I will not ask students or seniors or middle-class families to pay down the entire deficit while people making over $250,000 aren’t asked to pay a dime more in taxes. This was a central question in the election. And on Tuesday, we found out that the majority of Americans agree with my approach—that includes Democrats, Independents, and Republicans.”

With their re-elections secure, President Obama and leaders in the U.S. Congress quickly turned to the immediate business of preventing the so-called “fiscal cliff,” the informal name given to the mix of automatic spending cuts and tax hikes that are scheduled to go into effect on January 2, 2013.

The spending cuts, officially known as “sequestration,” will apply to military and domestic spending alike and would cut funding for the U.S. Department of Education by 8.2 percent or $4.1 billion, according to a report from the Office of Management and Budget (OMB). Among individual programs, an 8.2 percent reduction in funding would mean a $1.2 billion cut to Title I in Fiscal Year 2013, a $973 million cut to special education, and a $146 million cut to career and technical education.

While members of both parties have indicated a willingness to work together to prevent the fiscal cliff, it’s unclear whether they can compromise on what role increased revenues, i.e. taxes, will play.

In his November 10 weekly address, President Obama said he campaigned on a plan that would increase taxes on the top 2 percent of individuals—those making more than $250,000 a year—and would not accept a plan that did not combine spending cuts with additional revenues.

“I refuse to accept any approach that isn’t balanced,” Obama said. “I will not ask students or seniors or middle-class families to pay down the entire deficit while people making over $250,000 aren’t asked to pay a dime more in taxes. This was a central question in the election. And on Tuesday, we found out that the majority of Americans agree with my approach—that includes Democrats, Independents, and Republicans.”

Obama said the nation cannot “cut [its] way to prosperity,” and maintained that his approach would reduce the deficit while also allowing the nation to invest in education, job training, and manufacturing.

In his weekly addressHouse Speaker John Boehner (R-OH) indicated that he would be willing to accept new revenues through the closing of special interest loopholes and tax deductions, but he said allowing the tax rate to rise on the top 2 percent would destroy jobs.

“Instead of raising tax rates on the American people and accepting the damage it will do to our economy, let’s start to actually solve the problem,” Boehner said. “Let’s focus on tax reform that closes special interest loopholes and lowers tax rates. Instead of accepting arbitrary cuts that will endanger our national defense, let’s get serious about shoring up the entitlement programs that are the primary drivers of our country’s massive, growing debt.”

On November 16, Obama will meet with Boehner and other congressional leaders at the White House to discuss how the fiscal cliff can be averted.

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Economic Impacts

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