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Originally published Sunday, December 2, 2012 at 8:38 PM

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Murray still stands firm on edge of 'fiscal cliff'

Deliberately jumping off the "fiscal cliff" — a reality that appears closer than ever — was an explosive idea when U.S. Sen. Patty Murray first gave it wide currency in July. The Washington Democrat said the strong-arm gambit was borne of disillusionment from last year's deficit-reduction supercommittee.

Seattle Times Washington bureau

The 'cliff' at a glance

The "fiscal cliff" is a combination of expiring tax cuts and major across-the-board spending reductions to the Pentagon and domestic programs that includes:

Expiring tax cuts: The expiration of George W. Bush-era tax cuts on income, investments, married couples and families with children and inheritances. In addition, some 26 million additional face the alternative minimum tax next filing season, which would raise their taxes by an average of $3,700. Cost through September: $330 billion.

Defense budget: A $55 billion, 9 percent cut in the defense budget next year and another $55 billion in cuts to domestic programs, including a 2 percent cut to Medicare providers.

Jobless benefits: The expiration of unemployment benefits for the long-term jobless.

Medicare controls: A sharp cut in reimbursements for doctors participating in Medicare.

Payroll taxes: The expiration of Obama's temporary 2 percentage-point cut in payroll taxes.

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WASHINGTON — U.S. Sen. Patty Murray has become the de facto leader of an idea that once seemed far-fetched: deliberately allowing the double punch of the looming "fiscal cliff" of massive tax increases and automatic spending cuts to take effect in January.

That strategy gained wider currency only five months ago, after Murray gave a speech in Washington, D.C., vowing to take the fiscal debate into 2013, rather than agree to a Republican deal "that throws middle-class families under the bus."

The Washington Democrat said Thursday that triggering the fiscal cliff is a last-resort option — but one Democrats will use if forced.

The strong-arm gambit was borne of her disillusionment after co-chairing last year's failed deficit-reduction supercommittee that was charged with seeking alternatives to $1.2 trillion in mandated budget cuts over the next decade.

It also reflected Murray's personal umbrage at the GOP's zeal for shrinking spending, as the daughter of a working-class Bothell family that for a time relied on food stamps. In effect, Murray personifies the middle class that Democrats have put front and center in their battle against the GOP.

"The one thing the Republicans wouldn't put on the table was revenue," Murray said of her stint on the supercommittee. "I knew what a bad deal would mean for the middle class in this country. Many of us are where we are in our lives because we had a country that was there for us."

Unless Congress strikes a deal by Dec. 31, all Bush-era tax cuts will expire as scheduled. Democrats then would seek to restore the lower rates only for family incomes below $250,000 a year.

That by definition becomes a vote to cut taxes — providing political cover for congressional Republicans, nearly all of whom have taken a vow with anti-tax crusader Grover Norquist not to raise taxes.

"On Jan. 1, the discussion changes for them" by loosening Norquist's grip on the GOP, said Murray, the fourth-ranking Senate Democratic leader.

It may well come to that. Republican leaders have shown little sign publicly of backing away from their insistence on keeping the tax cuts for wealthier Americans, despite a new more conciliatory tone from Sen. John McCain of Arizona and other prominent Republicans on the need for more revenue.

For their part, Democrats appear none too eager to give in much to Republican demands to further rein in federal spending.

A handful of Republicans have declared their willingness to break their allegiance to Norquist. U.S. Rep. Cathy McMorris Rodgers of Spokane isn't among them.

McMorris Rodgers, who will be the No. 4 House Republican leader in the next Congress, said her vow to Norquist was not to raise tax rates, not tax revenue. Raising tax rates, she said, remains for her nonnegotiable. Instead, she said Congress should simplify the tax code, close loopholes and reduce spending.

McMorris Rodgers accused Murray of issuing "political ultimatums" that would damage the economy. "Our tax rates are already high, and it would be the worst time to raise taxes on anyone," she said.

The Republican characterized President Obama's latest tax-and-spending deal as a step back from the Democrat's offer during the 2011 debt-ceiling crisis, because the latest offer pays only lip service to cutting spending while focusing mostly on raising taxes on upper-income families.

That may be because gains in the November elections have stiffened Democrats' resolve not to capitulate again, said Stan Collender, a veteran congressional budget expert. Murray and many Democrats did so in 2010 when they voted to renew all Bush tax cuts for two more years rather than face wholesale expiration.

"I'm assuming that we'll go over the cliff on Jan 1, then fix it a week or so later," said Collender, national director of financial communications at QorvisCommunications. Democrats "have more reason to take a hard line against another extension."

A slew of tax breaks are slated to go away at the end of the month. The top marginal income-tax rate, for instance, will revert to the 39.6 percent rate in effect under President Clinton, from the current 35 percent. The 2 percent payroll-tax holiday also will lapse, as well as lower taxes on dividends and capital gains, higher-child tax credits, among others.

Economists say a brief standoff should have minimal impact on the economy. But the sudden combined jolt of curtailed government spending and higher taxes would send unemployment rates higher if the impasse is extended, according to the Congressional Budget office (CBO).

Over the long haul, the CBO said, higher tax revenue and less spending will significantly slash the federal debt.

Murray said that after Jan. 1, "the risk is on the Republican Party very clearly" to avoid dragging the economy down. She contends the GOP thinks almost solely in terms of cutting and slashing, not investing and growing.

In a widely covered speech in July at the Brookings Institution, Murray complained Republican members of the supercommittee snookered Democrats into believing they were serious about hashing out a compromise. After much back and forth, she said, it became clear when it came to new revenue, the Republicans "hadn't even left their corner."

Then Murray issued the threat that has become perhaps the Democrats' most potent tool: They'll accept no deal over a lousy one.

Some liberals are urging Democrats to hang tough to make the tactic pay off. But other key Democrats, notably House Minority Leader Nancy Pelosi, haven't exactly embraced the notion of negotiating with threats.

Murray wasn't the first Democrat to suggest going over the cliff. A month earlier, Sen. Max Baucus of Montana, for one, had mused aloud at a Senate Finance Committee hearing that letting all the tax cuts lapse would wipe the slate clean for Republicans. Murray's speech was a major signal the ploy had become a full-fledged strategy.

For their part, Murray said Democrats have offered difficult cuts on entitlement spending and other concessions. Even before the supercommittee met, for instance, President Obama last year offered to trim $250 billion from Medicare over 10 years and to slow the rate of growth for Social Security benefits.

He even alarmed liberals by floating the idea of delaying Medicare eligibility by two years to age 67, a notion that key Democrats this time are trying to prevent from being resurrected.

No matter what the government cuts, Murray said, "You can't do the math without revenue as part of the solution. That's why I feel so strongly about this."

Kyung Song: 202-383-6108 or ksong@seattletimes.com

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