Kudlow: Obstinate President On Crash Course?
As Republicans return to Congress to tackle the "fiscal cliff", will they find a sincere attempt to compromise or just a sore winner?
That's a big worry among GOP leaders – as they attempt to negotiate a deal to avoid going over the edge.
The fiscal cliff refers to the confluence of tax hikes and spending cuts that could go into effect as soon as January 2013 – that is, unless lawmakers are able to agree on a compromise.
Following the election, President Obama immediately insisted that he would not budge on his demand to end Bush-era tax cuts permanently for people making over $250,000.
In other words, despite the wobbly economy, the President has demanded a tax increase for high earning Americans. In fact, he's threatened to veto any deal that doesn't include as much.
Worried that the economy is too fragile to raise anyone's taxes, John Boehner, the Republican Speaker of the House has offered to compromise in other areas - such as eliminating deductions - if the President backs down from the tax increase.
"Raising tax rates will slow down our ability to create the jobs that everyone says they want," Boehner said.
"I'm hoping the President will accept the olive branch extended by Speaker Boehner," said Sen. Bob Corker, (R) TN on The Kudlow Report. "We should look at ways to eliminate loopholes – not raising rates."
But rather than work with Republicans, skeptics such as Grover Norquist, President of Americans for Tax Reform, worry that the President may refuse almost any compromise. That is, if Obama doesn't get his way – he'll allow the country to go over the cliff.
And make no mistake, if the nation goes over the cliff, taxes will increase on everyone, not just the rich.
The impact would be significant - on average it would mean an increase of 3 to 5 percent for most Americans. (According to US News, taxes on a family earning $80,000 would spike up to 28% from 25% currently – that translates into about $1,450 worth of additional tax.)
The other big impact would come as a ripple from a sharp decrease in defense spending.
The fiscal cliff would immediately trigger a $55 billion, 9 percent cut in defense spending next year and another $55 billion in cuts to domestic programs, including a 2 percent cut to Medicare providers.
And that doesn't begin to account for the ripple generated by other tax hikes and spending cuts that will also go into effect.
"Unlike in the past, let's hope the President accepts an olive branch," said Larry Kudlow.
"I really believe the fiscal cliff is not going to happen," added Corker.
"The Kudlow Report" airs weeknights at 7 p.m. ET.