Give politicians a cliff, they’ll give you a cliffhanger.
Federal Reserve Chairman Ben Bernanke first invoked the “fiscal cliff” way back on Feb. 28, warning Congress of the ill effects if the Bush tax cuts and the payroll tax cuts were to expire on the final day of 2012, followed by the rapid onset of $1.2 trillion in automatic spending cuts.
As he told the House Financial Services Committee at the time, “I hope that Congress will look at that and figure out ways to achieve the same long-run fiscal improvement without having it all happen at one date.”
Since then, it’s been a slog to the precipice, as Congress and the president have been unable to fashion a compromise that would produce a sensible long-term plan for reducing the deficit without killing the recovery.
As of late Monday afternoon, all hope for a comprehensive solution had been lost, as Congress scrambled to put together a patchwork deal that delays big decisions until March. Failing that, the nation will head over the cliff, which would at least put a dent in the deficit.
The House announced that it would not schedule a vote on Monday night, which guarantees at least one day of Americans not knowing what their tax rates will be in 2013.
The very fact that Congress is scrambling after getting a 10-month warning is appalling. Rather than focus on what’s best for the country, both political parties have maneuvered to assure their own survival. They could agree only to postpone the discussion until the elections were over. Since then, party leaders have steered into one dark alley after another, only to find they didn’t have the necessary backup. House Speaker John Boehner couldn’t even get support for a symbolic tax hike on millionaires.
While President Barack Obama and Speaker Boehner capture most of the attention, the real intransigence can be traced to congressional Republicans who won’t say yes to any tax increase and Democrats who refuse to commit to any significant spending cuts, especially on large items such as Medicare and Medicaid.
The reported “grand bargain” that Obama and Boehner discussed in summer 2011 looks statesman-like compared with the current display of cowardice. That deal reportedly included trillions in spending cuts and tax increases aimed at lowering the nation’s debt, which has moved past $16 trillion. Before that, the bipartisan Simpson-Bowles commission produced a plan to cut approximately $3 in spending for every $1 in tax increases, with a goal of more than $4 trillion in deficit reduction over 10 years.
By comparison, the emergency compromise being fashioned by Congress is positively puny. It plucks the nation from one cliff, but places it on a higher one in March, when Congress must vote on raising the debt ceiling. The last time that dreary debate was held, the financial markets dove and the economy downshifted.
Today is the first day of a new year, but when it comes to the federal budget it doesn’t feel any different. Sadly, a leap from the cliff may be healthier than the proposed rescues.
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