Teetering on the Fiscal Cliff
As the fiscal cliff deadline approaches with its spending cuts and tax increases, the word from Washington changes by the hour.
While members of both parties have commendably voiced a desire to find common ground and a negotiated solution, the overall rhetoric is not encouraging.
No one is certain what the full impact will be if we go over the fiscal cliff—from a sloping decrease in economic activity to full recession—but there seems to be no doubt that it will have a highly destabilizing impact on the U.S. economy.
Ultimately, as The Common Good’s upcoming (Monday, December 3rd) guest Alan Simpson said: “If you go to a legislative body and you cannot compromise, you shouldn’t be there.” [Event tickets here]
The Common Good urges both parties to find common ground for compromise, in order to avoid further damage to our nation’s economy.
Here are some of the most recent developments:
POLITICO, Jake Sherman and Manu Raju (11/29)— Speaker John Boehner said “no substantive progress has been made” in negotiations between congressional leadership and the White House to avoid the so-called fiscal cliff of tax increases and spending cuts that takes hold at year-end.
Republicans are insisting on significant reforms to entitlement programs like Medicare and Medicaid, deep spending cuts and not raising tax rates for the wealthy. Democrats say their bottom line is simple: taxes on high-income earners must go up.
“Right now, all eyes are on the White House,” the speaker said. […] Senate Majority Leader Harry Reid (D-Nev.) offered a completely divergent assessment. He said Democrats are still waiting for a serious offer from the Republicans, urging them to move past “happy talk” deliver specifics on how the government would boost revenues.
A long-term deficit deal is impossible, and the quest for one is hurting the country.
SLATE, Matthew Yglesias (11/28)— The fiscal cliff is confusing, even to the Washington legislators arguing about it. On the one hand, the cliff consists of rapid deficit-reducing tax increases and spending cuts. On the other hand, the people most adamant about the need to avoid the cliff are calling for deficit reduction. I listened to No. 2 Senate Democrat Dick Durbin give a fiscal-cliff speech on Tuesday framed around the idea that “deficit reduction is a progressive cause.” The main anti-cliff group is even named Fix the Debt.
Congress has structured the rules so that only an agreement on long-term deficit reduction—a grand bargain—can prevent the growth-killing, short-term deficit reduction of the fiscal cliff. But that’s no coincidence.
Proponents of the grand bargain to resolve long-term fiscal questions don’t favor a bargain because they want to avoid the fiscal cliff. They deliberately created the fiscal cliff in hopes that the emergency would set the stage for a grand bargain.
It’s a strategy they hit upon only after their previous hope that the 2011 debt-ceiling crisis would force a bargain proved futile.
BROOKINGS, Scott Winship (11/27)— With the election and Thanksgiving out of the way, the rest of the year is shaping up to be an epic showdown between Democrats and Republicans over tax policy and how to avoid going over the fiscal cliff.
At this point there appears to be little room for optimism that either side will give enough ground to avert the spending cuts and tax hikes that will otherwise go into effect within weeks.
How markets—and voters—will react to the resulting contractionary pressure will likely depend on the extent to which the “cliff” is recognized to be potentially no more than a slope and on the actions Democrats and Republicans take to make the downward slide a gentle one.
POLITICO, Kate Nocera (11/28)— Grover Norquist, long the most feared man in Republican politics, says members of Congress have no reason to be afraid of him.
Based on what the anti-tax crusader said in a lengthy interview with POLITICO on Wednesday, he might actually be right.
The typically unbending Americans for Tax Reform president — you either sign my pledge or you’re squishy on taxes — showed a more flexible, nonthreatening side at a Playbook Breakfast with Mike Allen. Norquist said House Speaker John Boehner (R-Ohio) and other Republicans need to fight mightily for deep spending cuts and against taxes.
[Norquist] steered clear — subtly but noticeably — of declaring war on members of Congress who might ultimately back a deal that includes higher taxes.