Epic clash nearing over taxes, spending

A showdown over the budget could begin after A showdown over the budget could begin after the November election and continue well into 2013. Photo Credit: iStock

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A budget showdown for the ages could begin after this year's election and stretch well into 2013 -- despite the threat that an impending half-trillion-dollar avalanche of tax increases and spending cuts might rekindle a national recession.

The reason: an unprecedented collision of high-stakes fiscal decisions, coming at a time of intense partisanship, a teetering economy, record federal deficits and, possibly, a new president.

Campaigning for the White House and Congress will make substantive action all but impossible before the elections. And agreement may be nearly as tough during a post-election, lame-duck session in November and December, barring a European financial meltdown or Middle East oil supply crisis that demands an immediate response by lawmakers.

"I don't know how a Congress that can't agree on anything in two years is all of a sudden going to come together with the administration in the last 45 days of the year to solve the problem," said Rep. Steven LaTourette (R-Ohio).

No one can confidently predict the outcome of the battle over what many are calling the "fiscal cliff." Much depends on whether President Barack Obama defeats Republican challenger Mitt Romney in November and which party controls Congress.

If Romney wins, Republicans will want to delay decisions until he takes office in January. In that case, a lame-duck session would focus on postponing the spending cuts and extending current tax rates for six months to a year. If Obama is re-elected, the fight could easily stretch into 2013 due to the complex issues and the parties' deep differences.

Still, bipartisan groups of senators are meeting discreetly to seek middle ground. Tuesday, a pair of respected budget veterans prodded lawmakers to drop their ideological differences and act. "It's almost like a war" threatening the U.S. way of life, Pete Domenici, a Republican and former Senate Budget Committee chairman, told the Senate Finance Committee. Alice Rivlin, a White House budget director under President Bill Clinton, said failure to act would be "cataclysmic."

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