11/13/2012 02:00 pm ET Updated Nov 13, 2012

Peter Welch: Go Over Fiscal Cliff If Necessary For A Good Deal

WASHINGTON -- Democrats should be willing to go over the so-called fiscal cliff if that is what it takes to get a good deal on taxes and spending, leading progressive Rep. Peter Welch (D-Vt.) argued Tuesday.

The fiscal cliff is the combination of automatic tax hikes and spending cuts Congress has passed over the last several years that is set to kick in at the start of 2013.

All sides agree that the tax system needs to be reformed and that spending has to be controlled, but the parties are far apart on exactly how. Democrats favor as part of their solution letting the Bush-era tax cuts expire only for income above $250,000, leaving the cuts in place for about 98 percent of the country. The Senate has passed a bill to do that.

Although House Speaker John Boehner (R-Ohio) has said the GOP is open to revenue, he has insisted that he only means revenue that could be brought in because the economy is growing, not by raising taxes on the wealthy. He argues growth would happen if Congress cuts taxes and closes loopholes.

But many Democrats have said that is essentially the same deal voters rejected in turning thumbs down on former GOP nominee Mitt Romney in the presidential contest, and some think the party should stand firm on the results of the election.

"We've got to get a durable deal, and not blink like we have in the past," Welch told The Huffington Post Tuesday. "For the past two years, we've been in lockdown, not only against revenues, but they've [Republicans] advocated in the Ryan budget to cut taxes."

Welch praised Boehner for suggesting a willingness to compromise in spite of what is likely to be strong opposition from his Tea Party members, but the Vermont congressman said he is also skeptical that Boehner can deliver or offer enough loopholes to close to avoid harsh cuts to safety-net programs.

"They're soothing words, but show me the money," Welch said. "It's a vague generality saying clean up the tax code and get revenues that way. Well, be specific. Are you talking about ending the mortgage interest deduction, the charitable deduction, the health care deduction? He's got to be specific in order to move ahead."

Welch said he doubts that President Barack Obama and Republicans will be able to work out the glaring differences between their plans by the end of the year, so he argues that rather than punt -- which he says would send the wrong message to financial markets -- leaders should take that first step over the cliff, using it for the purpose it was intended: to force Congress to deal.

"Jan. 1, [when] the day of reckoning arrives," he said, "Congress is under enormous pressure to come up with a comprehensive resolution in order to avert what will be the negative economic impact of a fully impletmented fiscal cliff."

Economists have warned that ending all the Bush tax cuts at the same time as the alternative minimum tax is set to haul in many more people -- and the same time as Congress' decade-long budget cut of some $1 trillion will begin -- could push the economy into recession again. It's a one-two punch of taking government money out of the economy while taking money out of consumers' pockets.

But Walsh noted that it's not actually a "cliff," and that there is time to work, since higher tax rates take a full year to have their full impact, and the budget cuts take even longer.

And with tax rates automatically resetting to the higher Clinton-era rates after Jan. 1, it leaves Democrats in the postion of pushing for tax cuts for nearly all of the country.

"Democrats would be in a good postion," Welch said. "Those of us who favor revenues as a significant component would be able to introduce legislation for 98 percent of Americans. In my view, you'd get a 100 percent vote for that tax cut."

If it took a few days into the new year to get it done, Welch argues that it would not be a disaster since the 98 percent cut could be retroactive.

"There'd be no impact on 98 percent of Americans," he said. Republicans argue that taxing the top 2 percent of earners would actually hurt small businesses, although only 3 percent of those small businesses earn more than $250,000.

"We've got time," Welch said. "The important goal is to get a substantial and durable deal that will be helpful to the middle class, and that's much more important than the date, whether it's done Dec. 31 or Jan. 5."

Congress would still have to work out how to handle the spending cuts to military and domestic programs that it mandated in last year's deal to raise the nation's debt ceiling, but addressing the tax question for most people would remove the top stumbling block, and likely ease negotiations on the lower-profile aspects of spending and taxes.

UPDATE: 2:55 p.m. -- House Minority Leader Nancy Pelosi sounded cool to Welch's idea.

"I want you to be disabused of any notion that there's any widespread thought that it would be a good thing for our country for us to go over the cliff," Pelosi told reporters on Capitol Hill. "We want an agreement. We want an agreement."

Michael McAuliff covers Congress and politics for The Huffington Post. Talk to him on Facebook.



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