Washington Veers Away from Fiscal Cliff, Now What?

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WASHINGTON -- Washington may have managed to veer away from the fiscal cliff at the last moment, but critics of the deal say there's still plenty of trouble ahead. 

The deal, approved by the Senate early New Year's Day and cleared the House late Tuesday, blocks those Bush-era tax cuts from going up on 99 percent of taxpayers. It will allow taxes to go up on couples making $450,000 and more.

Many conservative groups state the emphasis on raising taxes instead of cutting spending will hurt the economy.

"The Heritage Foundation has done a study that looks at what would happen if you do a plan very similar to this," Michael Needham, CEO of Heritage Action, told CBN News. "And it found there'd be a $200 billion hurt in terms of GDP to the economy."

That could make an already weak economy even weaker. Such a negative effect will likely be felt not only in the United States but worldwide.

For instance, it could hurt in export-dependent China, where the boom days have been replaced by modest growth -- or in Europe, where economic basket cases like Greece and Spain are already putting a strain on the entire European Union.

It could also kill some recent signs of recovery at home: an improving housing market, more jobs, higher production.

"Now the Congressional Budget Office warns us that Mr. Obama's 'eat the rich' crusade will actually result in throwing 200,000 middle class families into unemployment. Ernst & Young estimates 700,000 lost jobs," Rep. Tom McClintock, R-Calif., said on the House floor.

Andy Roth, vice president of government affairs for the Club for Growth, said targeting wealthier Americans for higher taxes will hurt everyone in the long run.

"They're the ones who build factories and they're the ones that provide jobs, so obviously taking more money away from them means less factories and less jobs," he said.

Others like Sister Richelle Friedman, with the activist group Nuns on the Bus, said they are pleased with the deal's emphasis on taxing the wealthy more.

Friedman told CBN News she'd been hoping for, "a deal that really is just: one that requires and asks those who have benefited greatly from our society to pay their fair share, which I don't believe they have thus far."

On the other hand, Sen. Rand Paul, R-Ky., warned this deal will backfire, taking money from the job-creators who could have helped grow the economy.

He told CBN News that now the amount of tax money coming to Washington may well shrink.

"They want more revenue. I think if you raise tax rates, you may get less revenue," Paul warned. "In 2011 in England they raised the tax rates and they actually got less revenue in 2012. And they're thinking about reversing course."

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Paul  Strand

Paul Strand

CBN News Washington Sr. Correspondent

As senior correspondent in CBN's Washington, D.C., bureau, Paul Strand has covered a variety of political and social issues, with an emphasis on defense, justice, and Congress.  Follow Paul on Twitter @PaulStrandCBN and "like" him at Facebook.com/PaulStrandCBN.