10:53 AM EST, November 26, 2012
Despite a booming first weekend of holiday sales, the stock market opened on a down note this morning because of a warning from White House economists about the fiscal cliff.
The National Economic Council and the Council of Economic Advisers say a sudden increase in taxes for middle-income taxpayers could reduce consumer spending next year by nearly $200 billion.
Northern Indiana Congressman Joe Donnelly is leaving today to head back to Washington.
The next five weeks for the fiscal cliff debate are critical. If an agreement can't be reached before the end of the year, automatic tax increases and spending cuts start to kick in.
Donnelly will join the Senate at the end of the year. He told WSBT he thinks there is reason for optimism.
“This is the moment,” he said. “This is the moment to grow our economy, to significantly reduce our long-term debts, and to create more jobs. Our businesses right now have more cash waiting to be invested than at any time in history.
When asked if he would vote to raise taxes, Congressman Donnelly says he will vote for an agreement that balances out both revenues and spending cuts.
He thinks the framework of a deal could be reached before the end of the year, but a three month extension might be needed to hammer out the final details.
Right now Congress and Obama have until the end of the year to avoid across the board tax increases that would do away with rates set during the administration of President George W. Bush and restore higher tax rates in place during President Bill Clinton's administration when the economy was robust and the federal government had a budget surplus.
Many middle income taxpayers also would be exposed to automatic tax increases under the Alternative Minimum Tax, which is designed to guarantee a certain level of tax payment by wealthier taxpayers.
According to the White House report, a married couple earning between $50,000 and $85,000 with two children would see a $2,200 increase in their taxes.
Obama wants the Bush-era tax rates to remain at their current level for households earning less than $250,000. He is calling on Congress to increase taxes for families earning more than that threshold.
Obama's plan is part of an overall deficit reduction package that would increase tax revenue by about $1.5 trillion and reduce spending by a similar amount over 10 years.
Congressional Republicans, led by House Speaker John Boehner of Ohio, have said they are open to including discussions about additional revenue but have balked at any plan that raises tax rates on the wealthy. They argue that the higher rates would also hit some small businesses, stifling economic growth.
House Majority Leader Eric Cantor said Monday the urgency of finding solutions intensifies as the end of the year approaches.
"If we don't do anything, on Jan. 1, 2013, there's a lot more people paying a lot more," the Virginia Republican said on MSNBC.
Cantor said the rapidly approaching deadline accounts for the more serious tone to the debate, but also reaffirmed the GOP's opposition to raising tax rates for the wealthy. "We've got to have the president step up and say, here's my position on how we reform these entitlements and start managing down the deficits," he said.
"What should be on the table is a recipe to fix the problem and not give away growth," Cantor said, when asked whether Republicans would agree to have increases in tax rates considered.
"We were re-elected to fix the problems, get the economy going again," he said. "Well, the president got re-elected and we know at the end of the year taxes are going to go up on everybody, rich and poor alike," if no action is taken to avert the hikes.
JIM KUHNHENN, Associated Press, contributed to this report
Copyright © 2013, WSBT-TV