Bungee-Jumping Over the Fiscal Cliff

robertreich.org — Obama’s only real bargaining leverage comes from the fact that when the Bush tax cuts expire at the end of December, America’s wealthiest will take the biggest hit. The highest marginal income tax rate will rise from 35 to 39.6 percent (for joint filers), and the capital gains rate from 15 to 20 percent. This will happen automatically if nothing is done between now and then to change course. It’s the default if Republicans won’t agree to anything else. It’s Obama’s trump card. So rather than stoking middle-class fears about the cliff, the White House ought to be doing the opposite – reassuring most Americans they can survive the fall. To utilize his trump card effectively, Obama needs to convince Republicans that the middle class is willing to jump. And the middle class can jump fearlessly if the White House and Democrats enact legislation that reinstates the Bush tax cuts for the middle class as of January 1.

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