May 17 (Bloomberg) -- Congress should act to avert an “utterly predictable” fiscal cliff of tax increases and spending cuts at the end of the year, 41 Republicans in the U.S. Senate wrote in a letter to Majority Leader Harry Reid today.
If Congress does nothing, the George W. Bush-era tax cuts will expire Dec. 31 and automatic spending cuts will start in 2013. The combined effect of those and other scheduled fiscal changes could reduce gross domestic product by about 3 percent, Barclays Capital estimates.
“It is essential that Congress and the president address these coming tax increases this summer, rather than creating additional uncertainty for families and job creators by waiting until the last possible minute,” the senators wrote. “The time to begin is now. Inaction is irresponsible.”
Lawmakers are sharply divided over what to do about the expiring tax breaks and the scheduled spending cuts that both parties are politicizing in advance of the Nov. 6 election and an expected lame-duck session before a new Congress is sworn in Jan. 3, 2013.
Democrats want what they call a balanced approach that would allow tax increases for top earners. Republicans say spending cuts alone should be used to reduce the budget deficit.
“Republicans can grandstand all they want,” Reid, a Nevada Democrat, said on May 15. “The fact is any agreement to avoid the fiscal cliff facing us at the end of this year must not gut programs that support the middle class like Medicare and Social Security and education. It must be balanced with policies that ask millionaires to help a little bit and do their fair share.”
Preventing the tax increases would boost the economy, the Republicans wrote.
“We can think of no better steps to take than to address the recessionary threat of Taxmageddon and eliminate some of the uncertainty that continues to contribute to economic malaise,” they wrote.
The letter was signed by 41 of the 47 Republicans in the U.S. Senate. Those who didn’t sign it were Scott Brown of Massachusetts, Tom Coburn of Oklahoma, Susan Collins of Maine, Bob Corker of Tennessee, Dean Heller of Nevada and Lisa Murkowski of Alaska.
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