The political cliff
The end of 2012 is just two weeks away, and President Barack Obama and House Speaker John Boehner, R-Ohio, have yet to sign to a deal that would avoid a scheduled $520 billion in tax increases and $130 billion in spending cuts next year. The "fiscal cliff" could harm the already-weak economy; according to a new analysis from Deutsche Bank, output could shrink by 2 percent in the first half of the year, and unemployment could grow by at least a percentage point.
Politicians should be aiming for a compromise that avoids short-term disaster while laying the basis of long-term fiscal stability. That's what they all say they want.
Lately, though, it appears some Republicans may see the problem differently not as a matter of avoiding a short-term disaster but of avoiding the blame for it.
Hence reports that some Senate Republicans are floating a plan that would essentially give up on the admittedly difficult negotiations with Obama while passing a bill in the Republican-controlled House that would protect all taxpayers except the top 2 percent from higher tax rates for the next year. It would be up to the Democratic-controlled Senate and the president to accept this fait accompli after all, the Senate passed the same bill last year or risk getting blamed for a middle-class tax increase themselves. Then, early next year, the GOP could return to discuss entitlement spending restraint, unburdened by the tax rate issue and empowered by the looming need to raise the federal debt ceiling.
This strikes us as too clever by half. No doubt Republicans are over a barrel, politically, on the tax issue; polls show that most Americans agree with the president on raising upper-income rates. And they have a right to be frustrated over the White House's refusal to engage in a serious discussion of entitlement.
But the reported GOP backup plan would raise only $440 billion in new revenue over 10 years, only about half the amount Boehner has publicly embraced and far too little to dent the debt. It would not affect such vital aspects of the fiscal cliff as $55 billion in defense cuts, a $31 billion increase in the estate tax or a 27 percent reduction in Medicare reimbursement rates to doctors. There's still enough fiscal contraction in those measures to set the economy back.
Meanwhile, the inevitable Democratic backlash would make it harder for the two parties to strike a broad deal early next year, the GOP's debt-ceiling leverage notwithstanding. Indeed, given the likelihood that using the debt ceiling to extract spending cuts would also be unpopular, the Republicans might succeed only in both postponing a crisis and getting the blame.
Both parties face a temptation to treat the fiscal cliff as an opportunity for political gain. But neither can solve its own problems without also making a credible, good-faith effort to solve the country's problems. They do not have to like this situation, but they do have to deal with it and with each other.