Right after Election Day, Congress and the president will face a gargantuan problem: By Dec. 31, drastic tax increases and spending cuts will kick in to suck about $607 billion from the economy. The Congressional Budget office has said the combination could push the U.S. back into a recession. It would also result in 83 percent of U.S. households facing an average $3,701 in tax increases, according to the Tax Policy Center.
Resolving the problem before the deadline, will of course be up to the very people who brought the country to the brink of default on its debt last summer and almost shut down the government at year-end because they couldn’t agree on whether to extend payroll tax cuts everyone claimed to support. With a track record like that, no one feels confident. And as my Bloomberg News colleague Richard Rubin reported Monday, lawmakers are nowhere near a deal. Representative Henry Waxman (D-Calif.) told Rubin that he and other lawmakers “don’t expect much from Congress” until after the election.
Yet there are signs that a compromise on Taxmageddon could be reached.