For the Fiscal Cliff Talks, It’s Back to the Future Again
December 5, 2012 · 2:46 PM EDT
Anyone who hoped that Democrats and Republicans could find a quick way to avoid the upcoming fiscal cliff should by now know that we are heading for another of those buzzer-beater endings — if Congress and the White House beat the buzzer at all.
While President Barack Obama and Speaker John A. Boehner said the right things on election night and during the days that followed about compromise and avoiding the fallout that could come with failing to deal with the expiring Bush tax cuts, the nation’s current political realities make a quick deal impossible.
Not that this should come as a surprise to anyone.
What we are witnessing now is very similar to what we saw during the summer of 2011, when Democrats and Republicans waited until the last minute — indeed only hours before an August “deadline” — to raise the debt ceiling.
As I noted in a column two and a half months before that debt ceiling deadline, both parties had a strong incentive to wait until the very last minute before agreeing on a compromise. The situation is no different now, even after the 2012 elections.
Arriving at a compromise “too early” gives ideologues within each party an opportunity to complain that their side “caved” prematurely and could have gotten more if their political leaders had simply acted tougher, demanded more and waited.
That is what happened to the White House during the 2010 lame-duck session, when Obama agreed to the extension of all of the Bush tax cuts. Liberal critics pounded him after the fact for compromising too quickly and giving Republicans a victory. (Of course, the president got plenty of other goodies during that lame-duck session, which was widely hailed as a successful one for him and his party.)
This time, liberals started pushing the president and Democratic congressional leaders hard immediately after the elections to dig in and force Republicans to give ground on tax cuts for those earning more than $250,000 per year.
While conservatives were rattled by November’s results, and more and more Republicans seem willing to compromise on the issue of revenue and taxes, Boehner knows that he still must prove to his conservative members (who, like the president, were just returned to Congress by their constituents) that he is getting the very best deal possible from the White House and the Senate.
The tendency to wait until the last minute before arriving at a deal is complicated this time by a chorus on the Democratic left singing a tune that conservative Republicans have been singing for the past couple of years: A deadline really isn’t a deadline at all.
As Sen. Patty Murray said in her mid-July 2012 speech at The Brookings Institution, “So if we can’t get a good deal — a balanced deal that calls on the wealthy to pay their fair share — then I will absolutely continue this debate into 2013 rather than lock in a long-term deal this year that throws middle-class families under the bus.”
Though Murray’s comment may have been more of a negotiating ploy than a hard line, it reminded me of a March meeting I had with Senate candidate Eric Hovde, who was seeking the GOP nomination in Wisconsin.
Hovde, a businessman with an extensive background in finance, surprised me when he said that, if elected, he would not vote to raise the debt ceiling.
But wouldn’t that lead to a U.S. government default and to panic in the markets? I asked.
No, said Hovde, arguing that investors would know that any inability by the U.S. government to refinance its debt and meet its financial obligations would be nothing more than a “technical default” that ultimately would be resolved.
I’m not certain whether a “technical default” is like a “legitimate rape,” but a default is a default, and going over the fiscal cliff is just asking for trouble.
Yes, purely from a tactical point of view, Democrats might be better off going into next year with the Bush tax cuts expiring and the sequester cuts kicking in automatically. Then Democratic leaders could propose a tax cut for 98 percent of Americans and use some of the additional revenue to offset some of the worse cuts required by the sequester.
But even if that might be the best way for Democrats to achieve their goals, it is a hell of a way to make policy, and the risks to the U.S. economy would be enormous. That is something on which both the White House and the speaker seem to agree.
A last-minute deal on taxes and spending probably is still more likely than not, I suppose. But don’t expect any action as long as there is still plenty of time remaining on the clock.