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DEMOCRATS GIVE A STANDING
ovation while Republicans
sit silently during a speech
by President Obama to a
joint session of Congress.
Is Congress hopelessly
divided, or is compromise still
possible?A
S THE DUST SETTLED FROM THE 2012 ELECTIONS, Congress and the nation
faced a problem that came to be known as the “fi scal cliff.” This term referred
to the $100 billion in spending cuts and the $500 billion in tax increases scheduled
to occur in 2013 because the “Supercommittee” formed in 2011 to decide how to
reduce the defi cit failed to reach an agreement (see Chapter 1). Half the cuts
triggered by the Supercommittee’s failure would come from military spending and
half from domestic spending, and taxes would increase as the Bush-era income tax
cuts expired. If Congress did not act, it was feared that the spending cuts and tax
increases would send the economy back into a recession in 2013.
Democrats and Republicans in Congress had very different ideas on how
to proceed. Nobody wanted deep cuts in defense spending or tax increases on
98 percent of Americans. However, Republicans wanted to extend tax cuts to
everyone, while Democrats wanted to raise taxes on the wealthiest 2 percent
of Americans back to the levels they were at in the 1990s. Democrats offered
to accept 2.5 dollars in spending cuts for every dollar in tax increases, but
Republicans wanted much deeper cuts in spending. Another point of contention
was that Republicans only wanted to raise revenue by limiting deductions and
closing loopholes, while Democrats wanted to raise the top tax rate on the
wealthy. Many observers worried that if a compromise wasn’t reached the
nation would end up hurtling off the fi scal cliff. As of late 2012, both sides were
playing tough, but it seemed likely the Congress would agree on a “bridge”
solution that would postpone the changes until after the new Congress took
over in January, allowing legislators more time to work out a compromise.