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5 Ways Obama Can Defuse a Fiscal Cliff Stalemate


These five steps are a mixed proposition for Obama -- they buy some additional time to reach a deal, but they also remove many of the economic pressures that would force a compromise.

Even if the "do nothing Congress" lives up to its reputation and doesn't come up with a deal, President Obama could still soften the economic blow of the fiscal cliff.

That might seem surprising for all the dire warnings being issued by lawmakers about the pending devastation from the combined $600 billion in tax hikes and spending cuts that are scheduled to hit at the start of 2013.

"Even if you went over the cliff for one month and then corrected it, you would still have a loss of GDP," House Minority Leader Nancy Pelosi, D-Calif., declared in an interview broadcast Sunday by ABC News' "This Week."

But budget experts say the White House has several tools for delaying the potential pain, should talks between Obama and congressional leaders about how to avoid the cliff spill into next year. Negotiations could stretch into February with minimal economic suffering, they say.

However, the five potential steps outlined below to blunt the impact of the fiscal cliff are a mixed proposition for Obama-they buy some additional time to reach a deal, but they also remove many of the economic pressures that would force a compromise.

Barry Anderson, deputy director of the National Governors Association, has been flying across the country to brief incoming state governments about the different options. "The question everyone asks is, 'Isn't this a risky game?'" Anderson told The Fiscal Times. "You bet it's a risky game."

Treasury Doesn't Collect More Taxes

Should we cross the fiscal cliff, income tax rates that were initially lowered by George W. Bush would reset to levels not seen since 2001. A family with a household income of $72,000 would owe a top marginal rate of 28% instead of the current 15%.

Most Americans pay their taxes by having a pre-determined sum withheld from their paychecks. This is the loophole the administration could exploit to shield families from the tax hike. "Just because the tax rates change, that doesn't mean the secretary of the Treasury has to change the withholding amounts," Anderson said.

Treasury Secretary Tim Geithner could decline to publish new tables indicating how much income should be withheld. Companies would continue to withhold taxes at the current levels, temporarily sparing families from a rate hike that would total more than $200 billion over the entire course of 2013.
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