Tim Geithner has a secret weapon, one that could help the country avoid a recession caused by the fiscal cliff.
The Treasury Secretary could freeze paycheck-withholding levels -- the government's cut out of each paycheck -- even if tax rates rise at the end of the year, Bloomberg reports. By letting taxpayers keep about $10 billion per pay period, that would single-handedly curb about half of the economic effect of the fiscal cliff and help the country avoid a recession.
The Obama administration and Congress are negotiating a deficit reduction deal in hopes of avoiding the fiscal cliff, a set of tax hikes and spending cuts scheduled to take place on January 1. Economists warn that the combination could push the country into a recession.
Obstacles remain on the path to compromise, especially with President Barack Obama remaining at odds with Congressional Republicans over the Bush-era tax cuts. Congressional Republicans oppose raising marginal tax rates, or the rate at which the top share of income is taxed.
Democrats also are reluctant to go down the Republican-proposed path of slashing spending on Medicare, Medicaid and Social Security.