Congress returned to work Tuesday with a hefty pile of post-election homework to tackle. But first, a pop quiz: What is the best possible way to avoid the impending fiscal cliff?
If the Republican-controlled Congress and President Barack Obama fail to reach a bipartisan alternative, tax cuts are set to expire and a broad spectrum of spending cuts are set to automatically take effect Jan. 1. The combination would result in a sudden reduction of the national deficit, pushing the deficit over the so-called fiscal cliff.
On the surface, a smaller national deficit does not seem so bad. However, the Congressional Budget Office linked the event to an increased risk of recession in 2013.
"Our disposable income is going to go down. They have estimated that an average family's tax burden may go up between $400 to $4,000 a year," said Jacqueline Khorassani, professor of economics at Marietta College.
Adding to that problem, trust in legislators will be diminished if they fail to come up with a solution, something the U.S. government can not afford to happen, she said.
"Just the fact that they could agree on something, it increases our trust in our government. That credibility is something that eases consumers' minds," she added.
The fiscal cliff
Term refers to the sudden reduction in the national deficit which will take place if Congress and President Obama do not enact new laws by Jan. 1.
If they do not, the Budget Control Act of 2011 will take effect.
It will discontinue Bush-era tax cuts and simultaneously mandate across the board spending cuts, including big cuts to the national defense budget.
The Congressional Budget Office predicted that if the nation do go over the so-called fiscal cliff, a recession is likely.
Source: Times research.
In the end, a solution will come down to the ability of both Democrats and Republicans to make concessions.
For their part, Democrats want to see the expiration of the tax cuts for those in the top tax brackets.
"I think they understand the people that are the top 1 or 2 percent need to pay a little bit more in taxes...The people who want to continue more tax cuts who are already deca-millionaires don't believe that, but responsible people in the business community do and that is most of the business community in Ohio," said Sen. Sherrod Brown, D-Ohio.
Brown said his long history of reaching across the political aisle makes him well suited for the task at hand. He pointed to his work with John Thune, R-South Dakota to propose legislature that would cut 20 billion dollars in direct payments to farm subsidies.
"Those are the kinds of things that should be part of the cuts we make," he added.
At the state level, Ohio Sen. Lou Gentile, D-Steubenville, will not directly be involved in the talks to avoid the crisis, but he said he is concerned about the effect the situation could have on Ohioans.
"My concern is deep posterity measures could impact us here in Ohio if these deep, deep cuts to defense go into place," he said.
According to the Budget Control Act of 2011, which mandates the deep budget cuts if no alternative is reached, defense spending will be significantly affected, meaning fewer paid soldiers.
"I think there needs to be a good balance between reasonable spending cuts that will not further hurt our economy and some consideration for going for more revenue in asking people at the top to pay their fair share," said Gentile.
But increased taxes are something that Republicans have balked at in previous negotiations. Obama's most recent budget proposal of a $1.6 trillion tax hike on corporations and the wealthy over the next decade was double the amount that House Speaker John Boehner, R-Ohio, had offered last year.
Ohio Rep. Andy Thompson, R-Marietta, agreed that tax hikes are not the way to go.
"I'm not so convinced it is a revenue problem as it is a spending problem," he said.
He also pointed out that if Congress and the President do not reach an agreement, the expiring tax cuts will not just affect the wealthy.
"Under this plan the Bush tax rates expire. Virtually everyone who pays taxes, their rates will go up," said Thompson.
It's a scenario that Congressman Bill Johnson, R-Ohio, also hopes to avoid.
"That lowest tax bracket, the 10 percent tax bracket is going to rise to 15 percent. That's a 50 percent increase in their taxes," he said.
For Johnson, the solution lies in increasing revenues through job creation and letting the American people keep more of what they earn. And he is prepared to do what it takes to see that solution come to fruition, he said.
"I can tell you that we are going to be here. We are going to fight hard to see that it gets done. I'm hopeful that the President and the Senate also see the value in coming to the table and doing what is best for the American people," said Johnson.
The American public is not so hopeful. According to a new Washington Post-Pew Research Center poll, 51 percent of Americans said they do not believe the President and Congress will reach an agreement by the Jan. 1 deadline. And state legislators on both sides of the aisle agree that Congress has a duty to get the job done.
"Congress has to get along here. I recognize that this is a bitter presidential election, but folks just have to work together," said Gentile.
Added Thompson, "My sense is we pay our senators and representatives pretty handsomely to do their job, and we need to ask them to do their job. They need to step up to the plate."