Who's responsible for approach of the 'fiscal cliff'?

All-Star panel weighs in


This is a rush transcript from "Special Report," October 18, 2012. This copy may not be in its final form and may be updated.


PRESIDENT BARACK OBAMA: We can't get this done unless we also ask wealthiest households to pay higher taxes on income above $250,000, pay the same rate we had when Bill Clinton was president.


REP. JOHN BOEHNER, R-OHIO, HOUSE SPEAKER: What we see out of the president is simply the lack of leadership. No leadership on solving the deficit problems. No leadership when it comes to the fiscal cliff we're going to face with tax rates going up January 1, with the sequester hitting on January 2.


BRET BAIER, HOST: Get ready. The fiscal cliff standoff is coming. The White House is signaling the president will veto any bill that doesn't include raising taxes on the rich. Here is what Jay Carney said, quote, "The president has long made clear he will veto an extension of tax cuts for the top two percent of Americans, the wealthiest Americans. That has been his position, as you know, for a long time."

The Romney campaign released a statement, "Rather than work in bipartisan manner as the fiscal cliff approaches, President Obama prefers to issue veto threats and simply ignore the other party. We can't afford four more years of this failed leadership."

We're back with the panel.  Mara, you know, we have this election coming of course. But the fiscal cliff is rapidly approaching.

MARA LIASSON, NATIONAL PUBLIC RADIO: The fiscal cliff is rapidly approaching and it's a big deal. It's totally of Congress and the White House's own making. They engineered this package of automatic spending cuts and tax hikes.  And the resolution of this is completely dependent on who wins the election. If Romney wins they will pass a stopgap to get them through the lame duck so we he gets in he can make a budget of his own. He said he wants a year to do the tax reform and big grand bargain that needs to be done.

If President Obama wins presumably they could get a deal in the lame duck. He would have a little bit more leverage. But the bottom line is the same there. There has to be a grand bargain on entitlements and tax reform to solve this problem. The reason we're here is Congress failed twice to get the deal done, Congress and White House failed twice.

BAIER: And the hope they could get it done in the lame duck.

FRED BARNES, EXECUTIVE EDITOR, THE WEEKLY STANDARD: Well they can't do a tax reform in the lame duck. It's not enough time. They have a couple of weeks in the lame duck. It's not just moving it up to 39.6 percent, top rate on individual income. I would go up higher than that. Tax on capital gains would go up to 24 percent.  Dividends would go from 15 percent up to 39.6 percent. There would be caps on deduction for top two percent, and so on. Then there is the 3.5 percent Medicare tax on investments that would certainly touch the two percent.

There would be a lot of taxes going up. That is the reason of course why the congressional budget office said our economy is already so weak, if you raise taxes we have a recession. That is not a hard prediction to make.  And as you know, Bret, the CBO, I mean they are not the most wild and crazy guys. They're pretty conservative in making these predictions like that.

The president has one hold card and that's the sequester. He knows the Republicans and conservatives do not want $600 billion in defense cuts to go in to effect starting in 2013. And it's been reported the president has said I would veto any attempt to block the sequester unless I get the tax increases on the top two percent.

Remember, one more thing, the top -- these tax increases are not fiscally -- it won't do that much. This is pure liberal ideology, pure ideology.

BAIER: The president, Charles, is signaling to top Democrats if he wins he will break the back of Republican Party, essentially he will have a mandate to force them to do what he wants.

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: I don't -- I'm not sure he will succeed. I don't think the Republicans will cave. I think he will carry out the bluff. I think he will send this over the cliff. And the reason is it really works to his advantage. The money here is not in what the wealthy are paying. The real money is what the middle class is paying and would pay if you abolish the Bush tax cuts. And 80 percent of them was revenue lost, revenue lost from the middle class.

Now, Obama promised he would never do this. Here he will say the Republicans held it hostage so he is not responsible. So he will get a gusher of revenue from middle class, from the upper class, from the defense cuts which will radically reduce the debt. You might have six months of recession. But he is re-elected. He won't get impeached or recalled.

So it would solve a huge element of the fiscal problem, raise taxes as he wants, cuts to defense as he wants. Why not do it? Then all the blame is on the part of Republicans. I think he will carry it out if he wins, which is a reason if you care about high taxes you might want to seriously consider how you vote on November 6.

LIASSON: He will not get a bill to veto because the Senate not going to pass that bill and not send it to his desk.

KRAUTHAMMER: There will be automatic hikes in taxes.

LIASSON: Not because he vetoed anything.

KRAUTHAMMER: And automatic cuts in defense.

BAIER: OK, that is it for the panel. 

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