Put the pressure on politicians to move forward

Whatever you think of the results, most of us will breathe a sigh of relief that we have finally come to the end of what sometimes seemed like an endless campaign. Now, as I wrote in this column last week, it is time to come together and forge bipartisan solutions to our most urgent problems.

I am optimistic we can do this, but the problems are daunting and time is short. This week everyone’s attention will be focused on what Federal Reserve Chairman Ben Bernanke first called the “fiscal cliff.” It will dominate the news for the next two months much as the campaign has until now.

This will be an unusual lame duck Congress. Most don’t do much. This one is going to deal with all three looming components of the cliff: huge changes in taxes, drastic cuts in defense and non-defense spending, and another extension of the debt ceiling.

The Bush tax cuts expire on Jan. 1. Without Congressional action, all tax rates will then revert to what they were under President Clinton. In addition, the 2 percent Social Security payroll tax holiday will end, along with emergency unemployment benefits and a number of tax breaks called tax extenders. No action on taxes would mean suddenly removing $400 billion from the 2013 economy.

Without Congressional action, the Congressionally-approved sequestration vote of 2011 will remove $110 billion in defense and non-defense spending from the 2013 budget.

Congress must approve raising the debt ceiling by early January at the latest, according to the best estimates of the Treasury Department. The last battle over the debt ceiling was a fiasco that ended with a downgrade in the U.S. credit rating.

Is it possible this Congress will do nothing? If that happens, $510 billion will be removed from next year’s economy and we will default on our debt. Just about all economists agree that this would throw the economy back into recession or something far worse.

There are two generally recognized alternatives for this Congress. Some think it should construct some type of a “bridge” to get through the lame duck session and put off any “grand bargain” until next year. They say there is not enough time to work out all the details and/or that a lame duck session is ill suited to the task.

Others think the next two months are the best time to make the grand bargain. Coming up with a patch will not be easy, they say, so why not try to deal with the problems right away? They believe this will be the first negotiation between President Obama and the Republicans in the House where the president has some leverage. This time, House Republicans would be risking raising taxes on everyone, a potentially politically disastrous outcome for them that they certainly don’t want. They know that if the Bush tax cuts expire, reinstating them will be impossible without the support of the president.

Also, although House Republicans voted for the sequestration, they never thought such deep defense cuts would ever actually be made. Now the only way they can avoid the cuts is to negotiate.

The president is officially on the record supporting some less drastic defense cuts to balance the budget. Both he and Congressional Republicans support cuts in non-defense discretionary spending, but the Democratic Senate may wade in to limit how deep those cuts will be. Finally, the president needs to pass the debt limit and wants to install some version of a Buffet millionaire’s tax.

Most of us who have studied the problem believe that everyone knows what the solution to the fiscal cliff is, even if they don’t want to say it out loud. Everything – both increasing revenues and decreasing expenditures – must be put on the table. That is what presidents George H.W. Bush and Clinton did, and the result was budget surpluses in the late 1990s.

The solution is bound to look something like bipartisan budget plans worked out by task forces led by former Clinton White House Chief of Staff Erskine Bowles and former Republican Sen. Alan Simpson, or by Alice Rivlin, who was President Clinton’s director of the Office of Management and Budget, and former Republican Senate Budget Committee Chair Pete Dominici.

There is bound to be the usual bombast and posturing in Washington over the next few weeks, but I believe the pressure on this Congress to work together with a re-elected president will be enormous. It will come from corporate America as well as from all the rest of us who simply want our political leaders to finally work together to solve our problems and get our economy moving forward at a faster pace.

Originally published 11 November 2012 on delawareonline.com