It is not surprising, but still disconcerting, that the Obama administration and congressional Republicans are continuing to play chicken with the fiscal cliff. They risk wrecking the national economy and, along with it, the finances of tens of millions of Americans.
Despite faintly optimistic signs recently from Republicans and Democrats, talks are roughly where they have been: nowhere. With only until the end of this month remaining, neither side is bargaining seriously – not yet. There are reasons for that, having to do with politics and strategy, but we suspect that’s of little comfort to those Americans who are simultaneously facing the prospects of a sudden increase in their taxes and severe cuts in government programs. What they want to see is something novel: prompt and responsible action in Washington.
They probably won’t get it. There is little incentive for Congress to act until nearer the end of the month, given the stakes involved. If Republicans quickly consent to higher tax rates on wealthy Americans or Democrats agree too soon to changes in Social Security or Medicare, they will set off howls of protest among their bases.
Better to wait, the strategy goes, eventually make the case that you negotiated the best deal possible at the deadline, then get out of town. It might also even matter that, come January, a new Congress will convene, not the one that angered true believers on the left and the right.
The way the political stars have aligned on this issue also gives President Obama significant leverage over congressional Republicans. If the nation goes over the fiscal cliff, the Bush tax cuts will come to end and all tax rates will rise to their level of early 2001.
Obama, who favors the end of those cuts only for the wealthiest Americans, could then demand that Congress pass a new set of tax cuts for the middle class and let Republicans decide whether to go along or be identified as the party that sank the middle class. Republicans might prefer to use their leverage to get a better deal before the cuts expire.
And Republicans have an important point to make here. With deficits of $1 trillion a year, something has to give. Those deficits were defensible – critical, even – given the economic crisis that gripped the country, but they can’t go on forever.
What is more, entitlements are growing out of control, especially Medicare and Medicaid. They demand attention. In truth, Congress should have been discussing those issues for the past several months, because it is unlikely verging on impossible that a deal on so complex and politically fraught a subject can be hammered out in the next three weeks.
Still, that’s where the deal is to be made. Republicans give up on protecting the wealthiest Americans from paying higher taxes and Democrats give ground on important but expensive social programs that scream to be reformed.
Obama is insisting that Republicans step up with a plan and, given the way Republicans gamed his effort at compromise throughout his first term, it’s hardly surprising. In the wake of an election in which Americans decisively re-elected Obama and even gave Democrats some extra seats in the House and Senate, Obama is dealing from a position of strength.
On Monday, Republicans offered a proposal that Obama declared a nonstarter, just as Republicans had rejected the plan he forwarded last week.
So, fine. Each side has staked its starting point, which is much more than they actually expect to get. Now it’s time for the real deal-making to begin. Obama and Republicans have to get serious and strike the bargain that awaits and that will, as it happens, serve the national interest. This isn’t as hard as they want Americans to believe.