Democrats and Republicans agree that the specter of another recession looms if they do not confront the challenges posed by an economic and political crisis over taxes and automatic spending cuts that combined could withdraw $600 billion from a struggling economy.
Republicans want to extend the Bush-era tax cuts, saving taxpayers about $180 billion next year, but Democrats want them extended only for families making less than $250,000 annually to minimize harm on social programs.
In January, the first round of automatic cuts begins under a deficit-reducing deal that would cut $1.2 trillion in projected spending over the next decade. The first cuts of about $110 billion begin at the start of the year, divided roughly equally between defense and domestic programs.
Democrats expressed skepticism about whether Republicans are willing to make concessions, in part because much of the negotiations are likely to be left in the hands of the failed vice presidential candidate, House Budget Committee Chairman Paul Ryan. Earlier this year, Ryan won approval of a budget outline without a single Democratic vote.
Representative Chris Van Hollen, the ranking Democrat on the House Budget Committee, said that it sounded like Republicans are sticking with their refusal to raise taxes on the wealthiest Americans.
“The Republican caucus has to ask itself whether they want to be part of the solution or whether they will double down on the extreme Tea Party agenda,” Van Hollen said. “They are having a conversation in the Republican Party now over what direction they want to take, and hopefully some of the more moderate voices will prevail.”
Analysts said the looming deadline of the fiscal cliff could force a deal.
“They don’t have any choice,” said Charlie Cook, editor of the nonpartisan Cook Political Report. “They have to address these issues. The public will force them and, quite frankly, the business and financial markets will force them.”
Rob Nichols, president of the Financial Services Forum, a business group, said a compromise must be reached to help the economy. “The stakes are just so significant and so high,” said Nichols.