Europe's
political problems are hogging the headlines, with good reason. So much debt
is coming due so soon that big decisions about Greece and Spain have to be
made within the next couple of months to avoid a systemic melt-down.
But the US
has some deadlines of its own, with no consensus on what to do about them.
Consider:
Congress
staring over edge of 'fiscal cliff'
For Congress, the outlines of the pending fiscal crisis are clear: Don't do a
thing, and watch the economy slip into a double-dip recession early next
year. Or cancel the looming tax increases and spending cuts, watch the
deficit rise, and push the government ever closer to a European-style debt
crisis.
That decision
was put in stark terms Tuesday by the Congressional Budget Office, which in a
new analysis said the economy will plunge into a recession early next year if
Congress lets taxes rise and spending be cut, as called for under the law.
But if
Congress changes the law to keep taxes low and spending high, it could add
more than half a trillion dollars to the deficit in 2013, marking a fifth
straight year of trillion-dollar deficits and risking the patience of the
country's creditors.
The CBO
numbers come just as the debate is heating up on Capitol Hill over how to
handle the looming "fiscal cliff," which Congress created by
continually pushing off tough decisions on both taxes and spending.
Senate
Majority Leader Harry Reid, Nevada Democrat, signaled Tuesday that he will
allow the automatic spending cuts called for in last year's debt deal to go
into effect -- culling billions of dollars from defense and domestic spending
-- unless Republicans agree to allow taxes to increase on at least some
taxpayers.
"If
Republicans want to walk away from the bipartisan spending cuts agreed to
last August, they will have to work with Democrats to replace them with a
balanced deficit-reduction package that asks millionaires to pay their fair
share," Mr. Reid said.
Republicans
remain adamant that the lower income- and investment-tax rates passed in 2001
and 2003 under President Bush, and extended in 2010 under President Obama,
must be extended again.
"No
economy can sustain such a hit without being hurled into recession,"
said Sen Orrin G. Hatch, the ranking Republican on
the Senate Finance Committee, which oversees tax policy.
One thing
both sides say they agree on, however, is the need to act now.
Last week,
House Speaker John A. Boehner kicked off the conversation, drawing a line in
the sand in saying that he won't allow another increase in the federal
government's debt ceiling unless it's matched dollar-for-dollar with future
spending cuts -- just as the 2011 debt deal was.
Mr. Boehner
also signaled he was open to ending some special tax breaks, as long as the
money was used to bring down tax rates for everyone. He acknowledged there
would be some who would pay more and some who would pay less.
But Democrats
said much of the extra money the government would generate by closing those
loopholes should go to funding the promises already made on spending, such as
Social Security, Medicare and regular domestic spending.
The list of
expiring laws reads like a taxpayer's worst nightmare: The alternative minimum
tax would bite ever deeper, last year's 2-percentage-point payroll-tax cut
would disappear, business-investing tax breaks would end, and almost all of
the 2001 and 2003 tax cuts would expire. Meanwhile, some tax increases from
Mr. Obama's health care law are slated to begin biting in January.
Meanwhile,
the US political middle has collapsed, making compromise virtually
impossible:
Is
polarization really all Republicans fault?
In a piece for the Post's Sunday Outlook section, Thomas Mann and Norm
Ornstein write that the rise in political polarization in Congress is not the
effect of both parties moving to their ideological extremes but rather of
Republicans moving far further to the right than Democrats
So, are they
right? Is it really Republicans' fault that we are in the partisan pickle in
which Congress is either unable or unwilling to solve problems -- whether
small or large -- facing the country?
What's
undeniably true is that we are living in an age of hyperpartisanship.
Mann and Ornstein cite a study conducted by political scientists Keith Poole
and Howard Rosenthal that details that fact vividly.
The annual
National Journal vote ratings -- an invaluable resource --
tells the story well. In 2010 and 2011, there was no Senate Democrat
with a more conservative voting record than any Senate Republican and no
Senate Republican with a more liberal voting record than any Senate Democrat.
That had happened only one other time in the previous 30 years before it
happened in the last two years straight.
Mann and
Ornstein are on very solid ground then in their assertion that we are in
uniquely partisan times. There is considerably more disagreement about
whether that blame should lie at the doorstep of the GOP, however.
"Both
caucuses have moved to the polar caps as more one-party districts are created
and members' reelections are dependent on primaries and not the general
elections," said Tom Davis, a well known
moderate and former Virginia Republican House Member. "The political
coalitions have evolved into a parliamentary system, which doesn't work in a checks and balances framework."
Some thoughts
We have
indeed become more polarized, but viewing this as something that just came
out of the blue or as a plot by one side or the other misses the point, which
is that the more debt a country takes on, the harder and thus less
politically marketable the fixes become. Cutting defense, Social Security, or
Medicare in half -- which is what it would take to make a dent in the current
deficit -- is unthinkable for those programs' proponents, so the arguments
coalesce around irrelevancies like slight changes in marginal tax rates or
penalties for expat billionaires. It's all just wasted effort.
Looked at
another way, easy money over extended periods of time drives good people out
of both public and private institutions and replaces them with predators
impervious to our opinion of them. That John Corzine is free and JPMorgan
Chase's traders are still gambling with taxpayer money just reinforces the
perception that there are two sets of rules, one for the aristocracy and
another for the serfs.
One last way
of looking at this is that both sides of the spending equation -- the
military industrial complex and big banks on the right, the
entitlement/regulatory state on the left -- have gotten everything they've
wanted for such a long time that they've evolved into monsters. No one on the
other side wants to compromise with an entity that is fundamentally evil, so
the belief takes hold that the only way to fix the country is to
"win", that is, to completely impose one's view rather than
splitting the difference. This may be true, but in a democracy it's a recipe
for gridlock.
But gridlock
is a temporary condition. For a country as for a family, when big debts are
coming due inaction is not an option. Someone will act in the coming year; it
just might be our creditors rather than our leaders.
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