Private congressional conversations about how to keep the country from racing off the fiscal cliff in January are already taking place in Washington, but few are willing to give many details. With the promise of anonymity, congressional staffers from both sides of the aisle are working feverishly to come up with solutions to the onrushing fiscal train wreck.
Investigator Richard Rubin, writing for Bloomberg, said the Republicans are building a “toolbox” of options — including raising taxes — that could be used during the lame duck session following Election Day. Which tools will be used depends on how the elections turn out. Likewise, Democrat staffers are developing their game plans as well, but tax cuts are not in their “toolbox” according to unnamed parties familiar with the discussions.
Which tools each side will be using depends upon if the Democrats retain control of the Senate and the White House, but fail to gain control of the House. If Romney wins, and the Senate goes Republican, then certain tools in the Republican toolbox will never see the light of day, including tax increases and cuts in military spending.
Of course, if the “Grand Bargain” fails once again to materialize, then there will be a massive $600 billion “speed bump” that starts on January 1, including tax hikes on the wealthy as the Bush tax cuts expire, increases in payroll taxes as the “tax holiday” ends, and the automatic cuts in defense and domestic programs — sequestration — take hold. Ordinary income, capital gains, and dividend income taxes would also increase, costing the average family an estimated $3,500 a year.
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