PD Editorial: Backing away from the fiscal cliff
Published: Tuesday, November 13, 2012 at 7:00 p.m.
Last Modified: Tuesday, November 13, 2012 at 5:09 p.m.
As Congress reconvenes this week, the agenda includes such arcana as importing polar bear carcasses. Before adjourning, the House and Senate may tackle postal reform and renewing the farm bill.
But the real challenge is avoiding the fiscal cliff.
Unless Congress acts before Jan. 1, a combination of tax increases and spending cuts totalling $700 billion next year alone will be triggered. That would be powerful medicine for the budget deficit and the debt, but it would come at a steep cost to the economy, with another recession likely by spring.
The trap is set because Congress couldn't agree on a debt-reduction plan in 2010. “It was designed to be a disaster,” Defense Secretary Leon Panetta said this summer. “Because the hope was, because it's such a disaster, that Congress would respond and do what was right.”
The disaster is upon us, and it can be avoided only by compromise, sacrifice and a display of bipartisanship that has been sorely lacking in Washington.
Fortunately, there have been signs of flexibility in the week since the election, with both President Barack Obama and House Speaker John Boehner committing themselves to finding a solution. Senate Minority Leader Mitch McConnell added his voice Tuesday, saying he's “open to new revenue” in exchange for entitlement reforms.
McConnell's statement echoed the broad outline that has been obvious for a long time. A solution must include spending cuts and revenue increases. It also must promote economic recovery in the short term while guaranteeing deficit and debt reduction over the long haul.
As a matter of both politics and policy, that's a difficult challenge. But the bipartisan Simpson-Bowles and Domenici-Rivlin commissions provided detailed plans that can guide the upcoming negotiations.
Obama won an impressive victory in the election and the leverage that comes with it. But Republicans still control the House, and the country can't afford another stalemate.
It's time to make a deal.
If the cost of entitlement programs isn't brought under control, they will continue to siphon funds from every other federal program, just as rising pension costs are draining state and local services. A robust economy needs federal investments in infrastructure, education and research. Those investments are at risk.
More revenue is needed not only for those programs but to retire debts incurred during two long wars and to ease the effects of an historic recession. Given the widening gap between rich and poor, the wealthy should bear the bulk of any added tax burden.
There is room to negotiate the details. Entitlement costs can be controlled without gutting the safety net, and raising tax rates isn't the only way to increase revenue. One idea gaining steam is a hard cap on income tax deductions — a proposal raised during the campaign by Mitt Romney that is being embraced by some Democrats.
A grand bargain could salvage the legacy of an otherwise unproductive 112th Congress while setting a hopeful tone for the senators and House members who take office in January. But even an interim agreement that pushes us back from the cliff while negotiations continue would be a step forward.
Obama is scheduled to meet with congressional leaders from both parties on Friday. If they're serious about making a deal, their talks should be guided by the words of Everett Dirksen, an Illinois Republican and Senate leader in the 1960s:
“I am a man of fixed and unbending principles, the first of which is to be flexible at all times.”
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