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Experts believe US Congress can reach deal to avoid fiscal cliff

posted 10 Nov 2012, 06:26 by Mpelembe   [ updated 10 Nov 2012, 06:28 ]
 
Fiscal Cliff -- Experts believe US Congress can reach deal to avoid fiscal cliff

China Central Television (CCTV) - US Congressional Democrats and Republicans are still split on tax increases to solve the nation's fiscal challenge, but some US economic experts are confident of the two rivals reaching an agreement.

"Their inability to get together has left us in this no man's land, in which we confront the fiscal cliff. They are going to have to make an agreement within the next six weeks, or we will fall off of that cliff," warned Bill Frenzel, director of the Brookings Governmental Affairs Institute, and former Republican US House Representative.

However, he believed that the Democrat controlled Senate and Republican retained House of Representatives will reach a compromise deal to avoid the fall off of the fiscal cliff, a package of tax hikes and spending cuts due early next year.

"I believe the negotiators will have an incentive to reach some agreement. The President's going to have to give a little, the Senate's going to have to give a little, the House is going to have to give a little bit more. And I believe that because the consequences are so bad, they are going to come to agreement," said Frenzel.

Unless the US Congress acts by the end of this year, a combination of tax increases and sweeping spending cuts, dubbed the "fiscal cliff", and with the combined savings valued at about 600 billion US dollars, is set to kick in.

President Barack Obama said in a press conference on Friday that the nation's wealthiest had to pay more taxes to help solve the government's fiscal challenge, and the debt reduction efforts should not hinder US economic growth pace.

His remarks were echoed by some economists who thought the current US economy could no longer bear the George W. Bush-era tax cuts to families earning more than 250,000 US dollars a year.

"Fiscal cliff presents an opportunity in a sense, because it's an opportunity to get rid of the Bush tax cuts. And the Bush tax cuts, are about 2.5 percent of GDP in terms of tax revenue, and the problem is we can't afford that loss of revenue now, if we could in the past," said William Cline, a senior researcher with Peterson Institute for International Economics.

However, in dueling press conferences held earlier Friday, John Boehner, US House of Representatives Speaker, said he opposed higher tax rates to solve the nation's fiscal challenge, citing a study from Ernst & Young that raising the income tax rates for the wealthy would destroy nearly 700,000 jobs in the country.

The split of the Congress in the tax cuts also stirred concerns among the budget watch dogs.

"The markets are jittery because they don't' see a way forward. The economy is fragile because we're still in a recovery period, and it's time for the president and the speaker and all of congress to kind of step up, make some difficult choices and step back from the cliff," said Ryan Alexander, president of Taxpayers for Common Sense, which claims itself to be a non-partisan budget watchdog serving as an independent voice for American taxpayers.

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