There is no fiscal cliff, Rep. Peter Defazio (D-Ore.) said on today’s Jansing & Co.
Defazio called the cliff “an unbelievable exaggeration” and recommended that Democrats wait until January 1st to negotiate, when they would be bargaining “from a position of strength.”
Defazio’s calculation: If the U.S. were to go “off” the fiscal cliff and allow the Bush-era tax cuts to expire on December 31st, this could generate revenue from tax rate increases on the wealthy. Then, in the new year, Democrats like Defazio argue that it would be easier to restore those cuts to the 98% of Americans making less than $250,000 a year than it is to negotiate with Republicans now.
There are other concerns with going off the cliff–Wall Street backlash and consumer confidence among them, as MSNBC’s Chris Jansing noted. Defazio said that though these worries are legitimate, he thinks that Democrats can assure the American public that everything will get sorted out in January.
“But why should they believe that, Congressman, with all due respect, when what they were hearing before the election was it was going to get done by the end of the year?” Jansing prompted.
Defazio’s response: “I don’t know where they heard that from or [where] they heard it from credibly.”
For starters, President Obama said today that he was ready to sign a bill extending tax cuts for the middle class immediately. And the White House released a social media campaign today prompting Americans to tell the president what $2,000 means to them–the amount a typical middle-class family will see in tax increases next year if Congress doesn’t act.
But Defazio maintains that Congress would be better suited to wait until January to strike a deal, as the current congressional session is a lame duck. As for Wall Street, he says, “[They’re] going to get hysterical because they want to drive tax cuts for the wealthy. They want to keep the special tax breaks for hedge fund managers and all the other goodies they’re getting. So yeah, they’ll manipulate the market and try and frighten Congress into doing a bad deal.”
Perhaps the biggest concern for Americans if a deal is not reached: mortgage deductions. The tax break for home buyers (who are now able to deduct their mortgage interest when assessing their tax bills) is the third largest tax expenditure on the federal budget, according to the Congressional Research Service.
Former Treasury Secretary Larry Summers recommended the mortgage deduction be phased out today on Morning Joe: “The advantage of a phase-out is, frankly, housing is coming back, but it can use a bunch of help. And if we phase it out, then people have an incentive to buy their houses sooner rather than later, so you can give the economy an extra lift.”
When asked if he agreed with Summers, Defazio shot back: “Absolutely not. I don’t think I’ve ever agreed with Larry Summers on anything. He was a disaster as an adviser to Obama. That’s crazy. The one tax break most middle income families in this country can get, unlike everything that’s available to the wealthy and the speculators and everybody else, is their mortgage interest deduction. I’m going to fight to keep that.”