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 email@example.com.
Are we about to go over a fiscal cliff? It’s looking more likely, but it may not be as alarming as it sounds.
Witnesses missing; Behenna case could be heard at Supreme Court
The film “Breaker Morant” was nominated for an Oscar for the best screenplay in 1980. It told the story of Harry “Breaker” Morant, an Australian who served in the British Army and was court-martialed for alleged war crimes during the Boer War in Southern Africa in the early years of the last century.
That conflict pitted the British Army against the descendants of the Dutch settlers who had migrated to what is now South Africa in the 17th and 18th centuries. The majority of them were farmers and in their language of Afrikaans were known as “Boers.”
Don’t leave Oklahoma!
May is graduation season. As I have done every year as lieutenant governor, I have given multiple commencement speeches. Advice flows freely during this time and it usually runs the gamut. What to do, what not to do, how to do ‘x’, be sure not to do ‘y.’ Too often commencement speakers speak in big generalities. So general, the message is frequently lost or forgotten.
Last-minute funding proposals not in state’s best interest
All indications point to this being the last week of this year’s legislative session. The Legislature will go home a week early. This is good news for Oklahomans as not only will there be cost savings but all Oklahomans should breathe a sigh of relief when the Legislature stops making new laws a week ahead of schedule.
As usual, the Legislature will take a number of important votes during the last week. Some will be forced due to attempts to introduce and pass far-reaching, new policies that should have been introduced much earlier in the year.
BY THE NUMBERS: Oklahoma still needs to invest in its economy
After six months of stagnation, the Oklahoma economy finally appears to be expanding again albeit still weakly. Unfortunately, our leaders aren’t making the investments we need to give our economic prospects a boost.
Last week the Oklahoma Office of Management and Enterprise Services reported that in April state General Revenue fund collections were 5.2 percent above the estimate and 14.7 percent higher than last year’s collections. Under normal circumstances, such a report would indicate that the Oklahoma economy was very strong. But this isn’t a normal circumstance, and April isn’t a normal month.
Americans deserve the truth on Benghazi
Lately, the media has been consumed by the controversies surrounding the White House. Among these controversies is the horrific terrorist attack on the United States’ diplomatic compound in Benghazi that took place Sept. 11, 2012. As more people come forward with additional information regarding the attack on the consulate, many Americans, including myself, are still asking for the truth.
The Obama Administration and the State Department have been less than forthcoming with key information on Benghazi and recent information points toward a major cover-up.
Seizure of AP phone records insult to independent press
Distrust of government secrecy has been elevated to an exceptional level with the disclosure the Justice Department covertly examined two months of Associated Press phone records to determine who leaked details to the AP about a foiled terrorist plot.
HEY HINK: Some people just are not cut out for command
Recent headlines cause me to remember an incident that occurred on an army base some years ago. Warning here: I’m taking some liberties with names and details, but the basic outline of events is accurate.
A certain company commander, let’s call him Captain Duntz, had command of a motor pool on a large army base in the continental U.S.
We’ve become our own worst enemies
The past couple months have been marked by a seeming unprecedented number of man-made tragedies, as distinct from those caused by violent outbursts of the natural world, such as earthquakes, hurricanes and tsunamis.
You don’t want to dwell too long on the negative, but we do have to take notice of horrific human events and we owe it to ourselves to respond to them in some way. We don’t always agree on those responses, however, and that usually exacerbates the problem.
Let’s reimburse higher ed for remediation costs
The good news: Oklahoma schools are teaching phonics. The bad news: It’s in college.
Students at Tulsa Community College, for example, can take a college English course called “Spelling and Phonics,” which “helps students master basic spelling literacy, principles of phonics and decoding skills.”
This sort of higher education brings to mind former Boston University president John Silber’s quip: “Higher than what?”
AGAINST THE GRAIN: Department of Commerce highlights Main Street successes
The 24th annual Oklahoma Main Street Awards Banquet was at the National Cowboy & Western Heritage Museum last week. Oklahoma Department of Commerce Secretary Dave Lopez addressed the gathering, and spoke of how the Commerce Department works with Main Street organizations throughout the state that are working to improve their downtown areas. Lopez pointed out that the partnership between his department and those local organizations has brought new life to those communities and that the attendees would see some of that revitalization in a video presentation. Oklahoma Gov. Mary Fallin also addressed the gathering, and said the Main Street program has resulted in more than $1 billion in investments in the state and more than 1 million volunteer hours in its 24 years of operation.
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