What happens if we go over the fiscal cliff?

Updated

With all the talk about the danger of the “fiscal cliff,” it’s worth asking, What would happen if we actually go over There’s so much talk about Congress needing to avoid the looming “fiscal cliff.” So what would happen if we actually go over it?

“If we go over the cliff and stay over the cliff I’m pretty sure we’d be looking at recession,” Jared Bernstein, an msnbc political analyst and former chief economic adviser to Joe Biden told Hardball’s Chris Matthew’s on Wednesday.

On the other hand, if Congress can hammer out a deal–even if it isn’t “completely stamped and approved on Jan. 1”–the cliff’s effect would likely just be temporary, said Bernstein. Same with the world markets.  “If we go over and stay over [the fiscal cliff], the markets will punish us,” he said. But if a deal was in the works and just wasn’t signed, “we’d be okay with a temporary trip over the cliff,” said Bernstein. It would be “terrible” but economically survivable.

(The fiscal cliff, of course, refers to a package of tax increase and spending cuts that will go into effect in January unless Congress passes a deal.)

House Democratic leader Nancy Pelosi told ABC this week that she won’t accept a solution unless it includes tax rate increases for America’s wealthiest. Closing loopholes and capping tax deductions for the wealthy—as some Republicans have suggested—is not enough, she said.

President Obama has also said the richest Americans need to pay more in taxes, but that he’s “open to compromise.” Republican House Speaker John Boehner has said such tax increases would be “unacceptable.”

Joan Walsh, an msnbc political analyst from Salon.com, put forth her own solution on Hardball. She suggested the Dems let the tax cut expire. Then Democrats could come back early next year and restore the tax cuts for the middle classes only.

“For 20 years I’ve been watching my Democratic presidents reach across the aisle for compromise and get their arms broken. And so I think it’s time for people like myself on the left to say…we don’t want to see a deal that cuts Medicare and Social Security,” said Walsh.

What happens if we go over the fiscal cliff?

Updated