The standoff is pushing the parties deeper into their trenches despite dire predictions about inaction.
WASHINGTON - Growing fears over next year's automatic spending cuts and looming tax increases are migrating from the green-eye-shaded corridors of Congress to the campaign trail, pushing the parties deeper into their trenches and making a stalemate-driven economic setback ever more likely.
In Senate campaigns from Montana to Virginia and House campaigns in military-heavy districts, candidates are making the "fiscal cliff" a new line of attack. And as they do, the prospects for compromise appear to be receding.
"Everyone in the room is talking in the same way: 'We need to find a solution, we need to be pragmatic, we need to find compromise.' We just can't seem to get there," said Rep. Bill Owens, D-N.Y., whose opponent is attacking him over automatic military cuts that could hurt his district's army base.
To economists, the standoff is maddening. Economic growth slowed to a 1.5 percent crawl from April to June, partly because businesses are holding off hiring and investment as they wait for Washington to decide what will happen next year, said Allen Sinai of Decision Economics, a forecasting firm. Virtually everyone agrees that allowing all the tax cuts to lapse and cutting spending will send the country into recession. Yet neither side is even talking compromise.
"I'm watching the 'fiscal cliff' coming," Sinai said. "It's out there for everyone to see. It's unthinkable. But unthinkable things have been happening."
He said Congress should pass what both parties agree on, an extension of tax cuts for the middle class, and then fight out tax levels for the rich and the fate of spending cuts after the election. That is not likely.
Senate Democrats last week muscled through legislation extending tax cuts for the middle class while allowing tax breaks for the rich to lapse. That, they said, was their answer to defusing the fiscal time bomb set to blow in January. House Republicans answered with legislation extending all the Bush-era tax cuts. Nothing more is expected until after the election.
The issues are being laid before voters in stark terms. After the partisan showdown last summer over raising the nation's borrowing limit, Sen. Jon Tester, D-Mont., joined 73 other senators -- including the entire Republican leadership -- in approving a deal that used automatic, across-the-board spending cuts to try to force a "grand bargain" on deficit reduction. Now, the Republican trying to take his Senate seat, Rep. Denny Rehberg is warning of "catastrophic consequences" from looming military cuts, and from Tester's vote.
Former Sen. George Allen of Virginia, a Republican, last week began an all-out effort to paint his Democratic opponent for his old Senate seat, former Gov. Tim Kaine, as the candidate who will drive the country over the "fiscal cliff." Kaine was nowhere near Congress when tax cuts were passed in 2001 and 2003 or when last summer's deficit deal was struck. But Kaine did express support for the compromise last summer.
Much of the fighting involves short memories about how Washington reached this precipice. But the deal was hard fought, with the White House among the last to sign on. Democrats had offered automatic cuts to domestic programs to help force Democratic budget negotiators to a compromise. They demanded a similar sacrifice from Republicans, preferably tax increases, said Rep. Chris Van Hollen, D-Md., one of the negotiators. Republicans instead offered military cuts, he said.
It passed the House with 174 GOP votes, including that of Speaker John Boehner and Reps. Eric Cantor, the House majority leader, and Howard McKeon, chairman of the Armed Services Committee. The 74-26 vote in the Senate included support from GOP leader Mitch McConnell and Jon Kyl, his deputy.
The tax side of the "fiscal cliff" was assembled nearly a decade ago. In 2001, Republicans who controlled the White House and Congress could not get the 60 votes needed for permanent tax cuts, so they had to use a tactic called "reconciliation" to beat a Democratic filibuster. That limited President George W. Bush's first $1.7 trillion tax cut proposal to 10 years.
When Bush came back in 2003 with more tax cuts, Republicans again used reconciliation, but instead of using the full, 10-year window, Republican tax writers used only seven, maximizing the initial size of the tax cuts and making sure all of the Bush-era tax reductions expired on the same day. That was supposed to increase the pressure on Congress to extend them or make them permanent.