Looming 'Fiscal Cliff' Of Tax Hikes Threatens U.S.

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Investors Business Daily:

House Speaker John Boehner is playing a heroic role right now. In his efforts to prevent the Bush tax cuts from expiring, Boehner is aggressively taking on President Obama's leadership ineptitude on the economy.

In essence, Boehner is pushing a Republican policy to wrap up a debt-limitation bill and extend the Bush tax cuts in one fell swoop before the election — and before all the last-minute, crisis-oriented, political machinations that would come in a lame-duck Congress, threatening another credit downgrade and leading to a business-hiring freeze and plunging stock market, all of which happened last year.

Tax-cut certainty is so vital right now because the anemic economic recovery may be moving toward deflation. That's the message of a gold price that has collapsed by nearly 20%, falling from around $1,900 an ounce to the mid-$1,500s.

With a risk-averse economy at home, and with the Greek and European financial crises abroad, the demand for dollars seems to exceed the dollar supply printed by the Fed.

This could be solved by more quantitative easing. But a better approach for a system already oversupplied with unused liquidity would be the extension of tax-rate growth incentives, not more monetary pump-priming.

The uncertainty over the Bush tax cuts already has caused a number of business leaders to threaten a hiring freeze and a dampening of investment until they can figure out the after-tax cost of capital and rate of return on investment.