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January 3, 2013
Avoiding the "Fiscal Cliff" Just the Opening Shot

Avoiding the "fiscal cliff" is just the beginning of what is sure to be a bruising battle between President Barack Obama and congressional Republicans.   An eleventh-hour win by Democrats on Tuesday averted the fiscal cliff and prevented tax hikes for virtually all American tax payers. But the victory of extending the Bush-era tax cuts for all but the wealthiest citizens will have Republicans digging in their heels over the need to reduce spending and the lower the debt ceiling.

The measure, signed by President Obama on Wednesday, raises income taxes on individuals earning more than $400,000 and families earning more than $450,000.  It also extends unemployment benefits for a year.  On the other hand, it merely defers the sequester for two months.

 AFL-CIO President Richard Trumka issued a statement on the fiscal cliff agreement.  In that statement Trumka accused Republicans of “hostage taking”, stating “the deal simply postpones the $1.2 trillion sequester for only two months and does not address the debt ceiling, setting the stage for more fiscal blackmail at the expense of the middle class.”

As the deadline again approaches for automatic spending cuts, Republicans are sure to push hard for significant cuts to federal “entitlement” programs which they consider to be the biggest drivers of federal debt. Additionally, Republicans will be looking for ways to reduce the debt ceiling. Attempts by the GOP on that front could result in a partial government shut-down or, as in 2011, a downgrade of the U.S. credit rating.

Nevertheless, Obama and the Democrats can be heartened that so many house Republicans caved and voted to raise taxes for the first time since 1993.