The Edmond Sun

Opinion

December 6, 2012

Your guide to the 'fiscal cliff'

EDMOND — Are we about to go over a fiscal cliff? It’s looking more likely, but it may not be as alarming as it sounds.

Here are three things you need to know about the impending crisis over the so-called fiscal cliff, the combination of tax increases and automatic spending cuts due to kick in at the turn of the year:

First, it’s not really a cliff; it’s merely a steep, scary slope. If Congress doesn’t act, federal taxes will increase by more than $500 billion next year and federal spending will be cut by about $200 billion. The impact would be equivalent to subtracting about 4 percent of gross domestic product, enough to push the economy into recession.

But that’s not going to happen — at least, not abruptly. The tax increases scheduled for the first of the year can be delayed either by a stopgap act of Congress or by a stroke of Timothy F. Geithner’s pen. (The Treasury secretary can simply postpone any change in tax withholding until a deal is made.) Spending cuts can be slowed down as well. So if Congress fails to make a deal by Christmas, that doesn’t mean the economy automatically tips into a recession.

Congress knows that, which is why almost nobody in Washington expects a comprehensive agreement on taxes and spending to be concluded in the next two weeks. When have we ever seen Congress make a deal before its back was against the wall?

That’s why President Obama called for a stopgap bill — “a down payment” — in an interview Tuesday with Bloomberg Television.

In Washington, an optimist is someone who thinks Congress will find an orderly way to postpone real negotiations until January. A pessimist is someone who agrees that the negotiations will be postponed, but in a chaotic way that sets off panic in the financial markets. And a realist is someone who thinks a little panic is needed to give each side an excuse to compromise on deeply felt fiscal principles.

Second fact: The Democrats have the upper hand. They just won a presidential election, plus two additional seats in the Senate, plus a handful of seats in the House. The issue of tax rates was the clearest choice presented to the voters, and most of them favored Obama’s plan to raise tax rates on the wealthy.

House Speaker John A. Boehner, R-Ohio, and his colleagues dismissed the outcome as “a status quo election” in their letter to Obama on Monday, but that was whistling past the graveyard. A Pew Research/Washington Post poll released Tuesday found that a solid majority of Americans say they will blame Republicans if an agreement is not reached.

“The testosterone levels on the Republican side are dramatically lower” than before the election, said Charlie Cook, Washington’s preeminent analyst of congressional anthropology.

Some Republicans are reluctantly admitting that they will have to accept higher tax rates on upper-income households as the price of even a stopgap deal. But the proposition divides the party deeply because it requires a break from the doctrine of ever-lower taxes that has defined the GOP for 20 years or more.

Needless to say, Democrats have been enjoying the spectacle of Republican disunity. Obama insists the increase in tax rates is “a matter of math,” but his tough line is also serving a political purpose, driving a wedge into the ranks of his opponents.

So far, Democrats have managed to duck tough decisions on how much to cut from Medicare, Medicaid and Social Security. Their day of reckoning will come, but probably not until next year.

Third fact: It may not be apparent, but progress is being made.

When Obama issued his initial proposal last week for $1.6 trillion in tax increases, $350 billion in health care spending cuts and $50 billion in new stimulus spending over 10 years, Boehner dismissed it as “non-serious.” He was right, in the sense that Obama didn’t take a significant step toward the middle; it was merely an opening bid.

Boehner’s counterproposal Monday was equally unserious. The Republicans proposed that federal revenue should rise by $800 billion, half of Obama’s figure, but without raising tax rates. They also proposed spending cuts twice as big as Obama’s. In short, it was another opening bid.

But it was signed by the leaders of the GOP’s conservative faction, Reps. Eric Cantor, R-Va., and Paul D. Ryan, R-Wis. In 2011, when Boehner tried to cut a deal with Obama that would have included $800 billion in new revenue, Cantor and Ryan never clearly signed on.

With the ball back in Obama’s court, the president offered on Tuesday to meet somewhere in the middle, just as long as Republicans agree to some increase in tax rates.

“I recognize that I’m not going to get 100 percent,” Obama said in his Bloomberg interview. “I’m happy to be flexible.”

He was asked whether he would insist on the top tax rate returning to the Clinton-era level of 39.6 percent, and carefully ducked the question — meaning, no. He agreed that Republicans are right to insist on specific cuts in spending on Medicare and Medicaid, not just vague promises of future cuts. And he left the door open to raising the Medicare eligibility age from 65 to 67, which is anathema to many liberals.

This is not the outline of a deal — not yet. But as Erskine Bowles, the author of another compromise plan, said this week, “Every offer put forward brings us closer to a deal.”

DOYLE MCMANUS is a columnist for The Los Angeles Times. Readers may send him email at doyle.mcmanus@latimes.com.

1
Text Only
Opinion
  • Healthier and Wealthier? Not in Oklahoma

    Increased copays, decreased coverage, diminished health care access, reduced provider budgets and increased frustration are all the outcomes of the Legislature’s 2014 health care funding decisions. Unlike some years in the past when a languishing state economy forced legislators into making cuts, the undesirable outcomes this year could easily have been avoided.

    July 26, 2014

  • Medicaid reform a necessity

    Historically, education spending by the state of Oklahoma has been the largest budget item. This is no longer the case. In recent years, the state of Oklahoma spends more on Medicaid (operated by the Oklahoma Health Care Authority) than common education and higher education combined, according to the state’s Comprehensive Annual Financial Report.

    July 25, 2014

  • Remembering lessons from 1974

    This week marks the 40th anniversary of an important milestone in America’s constitutional history. On July 24, 1974, the Supreme Court voted 8-0 to order the Nixon White House to turn over audiotapes that would prove the president and his close aides were guilty of criminal violations. This ruling established with crystal clarity that the executive branch could not hide behind the shield of executive privilege to protect itself from the consequences of illegal behavior. It was a triumph for the continued vitality of our constitutional form of government.

    July 25, 2014

  • RedBlueAmerica: Is parenting being criminalized in America?

    Debra Harrell was arrested recently after the McDonald’s employee let her daughter spend the day playing in a nearby park while she worked her shift. The South Carolina woman says her daughter had a cell phone in case of danger, and critics say that children once were given the independence to spend a few unsupervised hours in a park.
    Is it a crime to parent “free-range” kids? Does Harrell deserve her problems? Joel Mathis and Ben Boychuk, the RedBlueAmerica columnists, debate the issue.

    July 24, 2014

  • Technology that will stimulate journalism’s future is now here

    To say technology has changed the newspaper media industry is understating the obvious. While much discussion focuses on how we read the news, technology is changing the way we report the news. The image of a reporter showing up to a scene with a pen and a pad is iconic but lost to the vestiges of time.
    I am asked frequently about the future of newspapers and, in particular, what does a successful future look like. For journalists, to be successful is to command multiple technologies and share news with readers in new and exciting ways.

    July 23, 2014

  • New Orleans features its own “Running of the Bulls”

    On July12, the streets of the Warehouse District of New Orleans were filled with thousands of young men who were seeking to avoid being hit with plastic bats wielded by women on roller skates as part of the annual “Running of the Bulls” that takes place in New Orleans.
    The event is based on the “Running of the Bulls” that occurs in Pamplona, Spain, that is  part of an annual occurrence in which a group of bulls rampage through the streets of Pamplona while men run from them to avoid being gored by their sharp horns. That event was introduced to the English-speaking world by Ernest Hemingway, who included scenes from it in his critically acclaimed 1926 novel “The Sun also Rises.”

    July 22, 2014

  • OTHER VIEW: Newsday: Lapses on deadly diseases demand explanation

    When we heard that the federal Centers for Disease Control and Prevention had created a potentially lethal safety risk by improperly sending deadly pathogens — like anthrax — to other laboratories around the country, our first reaction was disbelief.

    July 22, 2014

  • Holding government accountable for open meeting violations

    A few weeks ago I wrote about the recent success of three important government transparency proposals which will go into law this year.

    July 21, 2014

  • GUEST OPINION — Oklahoma GOP voters want educational choices

    A Braun Research survey released in January showed that Oklahoma voters — Republicans, Democrats, and Independents alike — favor parental choice in education.

    July 21, 2014

  • HEY HINK: IRS interferes with citizens’ rights of free speech

    The patient is gravely ill. We have detected traces of a deadly venom in the bloodstream. We don’t know how widespread the poison is, but we know, if not counteracted, toxins of this kind can rot the patient’s vital organs and could ultimately prove fatal.

    July 19, 2014

Poll

If the Republican runoff for the 5th District congressional seat were today, which candidate would you vote for?

Patrice Douglas
Steve Russell
Undecided
     View Results