Democrats threaten tax increase

WASHINGTON -- Democrats are going all-in in a fiscal game of chicken, saying they'll let everyone's income taxes rise on Jan. 1 and slash military spending amid 8-plus percent unemployment if Republicans continue to balk at raising taxes just on those making more than $250,000 a year.

The brave face is being adopted as President Barack Obama and Congress come to grips with the possibility that gridlock and stalemate will result in the government careening off a fiscal cliff in January with automatic tax increases, spending cuts and an approaching exhaustion of borrowing ability.

"If we can't get a good deal, a balanced deal that calls on the wealthy to pay their fair share, then I will absolutely continue this debate into 2013 rather than lock in a long-term deal this year that throws middle-class families under the bus," Sen. Patty Murray (D-Wash.) said.

Her salvo was the latest in an almost daily back-and-forth between Republicans and Democrats over the one-two punch facing the economy in January: expiration of the Bush tax cuts and the imposition of $110 billion in automatic spending cuts, half coming from defense.

"They're ready and willing to go right off the fiscal cliff if they don't get their way," said Senate GOP Leader Mitch McConnell. "Because they think it will make it likelier they'll get their way."

McConnell was an architect of the automatic spending cuts, which were designed more to prod a deficit-reduction supercommittee to reach an agreement rather than to actually take effect. The supercommittee failed and the idea of automatic cuts is now an unpopular one.

The gamesmanship includes votes in the GOP-controlled House and Democratic-run Senate in the next two weeks on competing one-year extensions of President George Bush's 2001 and 2003 tax cuts. The GOP version extends the full range of the Bush tax cuts.

Democrats are bolstered by polls that show voters favor increasing taxes on the wealthy.

But they also risk sharing the blame for a broader tax increase and sudden spending cuts that economists say would probably throw the economy back into recession next year.