(Photo: Reuters/Larry Downing)
Former President Bill Clinton took to the airwaves Tuesday to offer President Obama some economic advice by suggesting that the White House back a temporary extension of what is known as the Bush tax cuts, which are set to expire in January.
The suggestion from one Democratic president to another may cause further scrutiny of the Obama administration's plan to increase taxes on those earning over $250,000 per year to raise money to reduce the nation's growing deficit.
During President George W. Bush's second term, Congress enacted a series of tax cuts, some of which will expire in January of 2013.
About that same time, $1.2 trillion in automatic spending cuts will take effect because the so-called "supercommittee" that met last fall was unable to reach a consensus on budget cuts or tax increases. Officials in the Congressional Budget Office have said allowing the two to occur at the same time may add to the nation's economic woes by causing another recession.
"What I think we need to do is find some way to avoid the fiscal cliff, to avoid doing anything that would contract the economy now, and then deal with what's necessary in the long-term debt reduction plan as soon as they can, which presumably will be after the election," Clinton said on CNBC's "Closing Bell With Maria Bartiromo."
Officials at the White House were mum on Clinton's comments, but others close to the president pointed out that Obama has repeatedly said that he would not extend the Bush tax cuts for high-income individuals and families when they expire.
In a new report released Tuesday, the CBO estimates the economy would shrink by 1.3 percent in the first half of next year if taxes increase at the same time the automatic spending cuts are enacted. Lawmakers on both sides of the aisle are saying that an agreement will either be reached late this year or very early in 2013 in order to avoid any further damage to the economy.
But the current disagreement between Democratic and Republican members of Congress shows little sign of ending soon. President Obama and Senate Majority Leader Harry Reid of Nevada have said they will not extend the Bush era tax cuts without some agreement from Republicans to raise taxes.
"If Republicans want to walk away from the bipartisan spending cuts agreed to last August, they will have to work with Democrats to replace them with a balanced deficit reduction package that asks millionaires to pay their fair share," Reid said in a statement on Tuesday.
Nonetheless, Republicans are still holding steady in their opposition to raising taxes, especially in a year when they are trying to recapture the White House.
"You can call this a fiscal cliff. You can call if Taxmageddon as others have done," Sen. Orrin Hatch (R-Utah) said. "Whatever you call it, it will be a disaster for the middle class. And it will be a disaster for the small businesses that will be the engine of our economic recovery."
Despite both sides saying something must be done soon, political pundits believe the White House will not push the issue until after the elections.