Get the nation on a safer path and then renew the fight later.
The deal passed by Congress Tuesday night to avoid the "fiscal cliff" is an ugly little contraption — a meager New Year's nip at staggering debt and deficit problems. It trims $650 billion compared with the big $4.6 trillion bite that would have come from simply doing nothing and letting cliff-triggered tax increases and spending cuts kick in.
OTHER VIEWS: Desire to pass it doesn't bode well
All the same, passing it was the right thing to do — mostly because a year of unproductive squabbling left it as the only option that could be passed in time. No one involved sees it as a final answer. It is, instead, a stop-gap aimed at avoiding the economic risk and human misery that going over the cliff would bring.
As appealing as the cliff-induced numbers are to deficit hawks like us, imposing them abruptly would have needlessly endangered a still struggling recovery and done so in a way that was intentionally designed to be so foolish that no one would do it. The immediate price could have been a severe reaction from the financial markets; longer term, say economists, the severity of the cliff would have pushed the economy back into recession.
But to avoid this potential calamity, negotiators essentially punted.
The mini bargain that appeared certain to be enacted Tuesday night was a little like a guy with a huge credit card bill deciding to make the minimum payment and then to buy a few more things with the card to make himself feel better.
Budget negotiators usually equate pain with serious deficit reduction, and even this deal will give the public a small taste of what's to come whenever Washington finally gets scared into real deficit reduction. Middle- and lower-income workers especially will feel the bite when about $1,000 is added to the average family's tax bill as Social Security taxes return to their normal level, ending one bit of stimulus used to float the economy for the past two years.
But that's pretty much the end of serious fiscal responsibility in the package. Take taxes on the wealthiest Americans. Obama campaigned for a year on raising tax rates on the top 2% of Americans, which was already an inadequate goal. There's no reason that the ruinously unaffordable Bush tax cuts shouldn't be phased out for just about everyone because all Americans have a stake in getting the national debt under control. But negotiators couldn't even bring themselves to discomfort the entire top 2%, settling instead for raising taxes on the tiny slice of Americans in the top 1%. Obama's actions, combined with long-standing Republican opposition to tax cuts, pretty much ensure that few people's rates will rise in the next four years.
Their hardest work done, negotiators then bought a list of expensive items, including renewing long-term unemployment benefits ($30 billion), preventing steep cuts to Medicare's doctor payments ($31 billion) and extending tax credits for taxpayers and businesses ($64 billion). Most of the cost went onto the national credit card. Some are appropriate for the short term, but at some point, they'll need to be paid for.
The greater failure — the one Obama and House Speaker John Boehner had sought to avoid with their unsuccessful "grand bargain" — was to substitute smart, gradual spending cuts and revenue increases for the ham-handed ones that would have resulted from going over the cliff. The automatic cuts, for example, were designed to slice mindlessly through all programs, no matter their value, provoking the Pentagon to warn of massive furloughs, with even troops exposed after September.
With deficits projected to continue rising dangerously in the wake of the mini-compromise, much more will be needed. Negotiators effectively set a new two-month deadline for the next deal, with renewal of the nation's borrowing authority as an even more dangerous trigger than the cliff. Given politicians' repeated failure to make hard decisions, only a wild-eyed optimist would assume a full agreement will get done. Instead, the measure of success is whether a string of deals — particularly on entitlement costs and the tax code — can get things moving in the right direction.
Standing on this compromise alone cannot achieve that goal. But torpedoing it would have been worse. The best course was to take the deal, getting the nation on a safer path for now. But it only resets the stage for the next suspenseful act.
Source: http://www.news.theusalinks.com/2013/01/01/editorial-ugly-fiscal-cliff-deal-had-to-pass/
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