CBO says a tax hike for the wealthy won’t kill economic growth

Allowing income tax rates to rise for wealthy Americans, and maintaining rates for the less affluent, would not hurt U.S. economic growth much in 2013, the Congressional Budget Office said on Thursday, stepping into a dispute between Republicans and Democrats over how to resolve the so-called “fiscal cliff.”

The report by the authoritative non-partisan arm of Congress is expected to fuel President Barack Obama’s demand for higher taxes on the rich, part of his proposal to avoid the full impact of the expiring tax cuts and across-the-board spending reductions set to begin in early 2013 unless Congress acts…

Obama has also stuck to his position, with the White House reiterating on Thursday that the president sees his election victory…as an endorsement by voters of his view on higher taxes for the affluent.

“One of the messages that was sent by the American people throughout this campaign is … (they) clearly chose the president’s view of making sure that the wealthiest Americans are asked to do a little bit more in the context of reducing our deficit in a balanced way,” senior White House adviser David Plouffe said.

Confirmed by every exit poll during the election.

The lack of progress in ending the standoff is spooking global markets, which fell again Thursday in part because of political uncertainty in Washington.

The concern was underscored by the credit rating agency, Standard & Poor’s, which said on Thursday it sees an increasing chance that the U.S. economy will go over the cliff next year. But it also said it expects policymakers will probably compromise in time to avoid that outcome.

Analysts at the agency see about a 15 percent chance that political brinkmanship will push the world’s largest economy over the fiscal cliff…

In an interview with ABC Television’s Diane Sawyer, Boehner repeated what he has been saying for two years: “Raising tax rates is unacceptable. … Frankly, it couldn’t even pass the House. I’m not sure it could pass the Senate,” he said, according to a transcript provided by the network…

What has passed the Senate was a bill guaranteeing no change in current tax rates on the middle class. Something Boehner says Republicans support – but, they have refused to vote for it in the House.

The CBO said extending all of the tax cuts would boost U.S. gross domestic product growth next year by a little less than 1.5 percentage points.

If the tax rates were extended only for individuals earning less than $200,000 and couples earnings less than $250,000, CBO said, growth would rise by 1.25 percent.

No one proposes maintaining deficit spending once we start to grow the economy at a 3% or greater rate. Something possible over the next few years. Of course, that’s part of the quandary faced by Republicans who saw their “whites only” ideology fail in the election – and seeing the economy continue to grow frustrates their lust for power even more. They have no comprehension of how the electorate might respond if they actually participated in an effort to improve the lot of all Americans instead of a narrow class of corporate country clubbers.

But, that restructuring will be a long-term process. Growing jobs, repairing our crap infrastructure, perhaps even bringing home a couple hundred thousand of the legions we have spread around the world in imperial glory – these are tasks that benefit the whole of the nation a lot sooner.

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