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Fiscal Cliff: Congress Must Put Down The Gun

Alex Blow |
December 30, 2012 | 6:48 p.m. PST


Congress has less than 24 hours to prevent the U.S. economy from going over the fiscal cliff.

The $600 billion of automatic spending cuts and tax increases set to take effect on January 1 will likely shove the economy back into a recession, pushing the unemployment rate back to above nine percent. Thus far, Congress has shown that it is still unable to compromise on a solution to this crisis. Over the past few weeks, our Congressional leaders have bickered over tax reform and spending cuts. Whereas it previously seemed like Congress would be able to craft a relatively decent deal to avoid the cliff, current discussions focus more on pointing fingers and crafting excuses.

Of course, we can no longer be rationally surprised at these results. Our policymakers were naïve enough to think that they could manufacture an opportunity to both reform the incredibly complicated tax code and restructure the significantly sensitive spending programs in less than eight weeks (clearly, no one was focusing on a compromise until after the election). This naivety has brought us within inches of another recession and the objective it has produced has been illogically interpreted as a necessity. Congress foolishly transformed the fiscal cliff debacle into a quest to solve the non-existent debt crisis (see The Federal Debt Part 2). Yet, the only threat that truly exists is that the gun aimed at Congress’s head may very well go off.

We must pause and remember, however, that this gun is being held by our policymakers themselves. The fiscal cliff was designed and assembled by the very people we elect to guarantee such a crisis does not occur. I often stop and marvel at the fact that our elected officials are struggling to avoid a disaster that they themselves created. Perhaps it is just as astonishing that they are, in fact, still struggling at this point.

The automatic spending cuts set to take effect on January 1 are simply the result of a trigger mechanism included in the Budget Control Act, the disastrous 2011 deal to raise the debt ceiling. As for the automatic tax increases, they are simply the result of the soon-to-expire 2001 to 2009 tax cuts (most notably, the temporary pay roll tax cut and the Bush tax cuts). Therefore, both can feasibly be avoided with little, if any, ingenuity. Nevertheless, Congress is still very much distracted by the desire for deficit reduction.

While the spending cuts are significant in that they are wide and deep, Congress has been primarily focused on the expiring tax legislation. Once again, Democrats demand that certain tax breaks expire for families earning over $250,000 a year, while many Republicans remain vehemently opposed to even the slightest tax increases. Considering that this debate has traditionally consisted of nothing more than each party respectfully raising their middle finger to the other, it is safe to say an agreement is rather improbable given the timeframe.

Given these unfortunate (but all too common) circumstances, the most sensible option is clear. Congress must, once again, temporarily extend the tax cuts and repeal the automatic spending cuts provision from the Budget Control Act. It is the relative ease and necessity of these tasks that should make us shudder at the fact that taking action remains a struggle for Congress. Nevertheless, there are many who believe a productive deal can still be reached. After all, Congress did successfully compromise to raise the debt ceiling within hours of what would have been the United States’ first default. There is, however, an important difference between the two events, a difference that warrants greater concern.

As disastrous as the debt ceiling negotiations were, it was rather farfetched to consider our policymakers would have permitted a default (though they did come unacceptably close). The consequences of such an event would critically undermine the stability of the entire global economy. However, the effects of going over the fiscal cliff are predominantly limited to the United States. This difference in severity has given many on Capitol Hill the irresponsible idea that going over the fiscal cliff is acceptable if the proposed deal is inadequate.

The failure of John Boehner’s Plan B, which would have allowed tax breaks to expire for those earning over $1 million annually, revealed that many Republicans in the House, viewing a second recession as tolerable collateral damage, are unwilling to break their sacred pledge to never raise taxes (even despite the approval of Americans for Tax Reform president Grover Norquist). Likewise, many Democrats entertain the idea of standing behind a decision by the re-elected President Obama to veto any deal that does not raise rates. In other words, it is frightfully more likely that our policymakers will pull the trigger this time around.

As a responsibility to their constituents, our elected officials should realize that their quest to sort out the federal budget is now nothing more than a dangerous delusion. Given the relative lack of ingenuity required to avoid the fiscal cliff and the disturbing degree of tolerance surrounding its effects, Congress should simply put the gun down. Perhaps our policymakers will be capable of tackling some of the problems plaguing the tax code and federal spending in 2013 (although I highly doubt it). After all, it has been quite some time since significant recovery legislation has been implemented. However, for the next 24 hours we can only hope our Congressional leaders are competent enough to accomplish the bare minimum in order to avoid irresponsibly sabotaging the United States’ economy.


Reach Contributor Alex Blow here.



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