There are not a lot of issues of more critical importance in the 2012 elections than the fiscal cliff. It is the near-term manifestation of the U.S.’s debt/deficit problem, and its threatened $500 billion jolt to the economy could push the country into another recession unless Congress and the President act.
Yet this issue is seldom acknowledged and never dwelt upon in the U.S. presidential campaigns. It makes sense for candidates to stay “on message” and try to avoid direct answers to tough questions. But it does not make sense that the public and the press seem to care more about tax returns, or how many rounds of golf the candidates have played. The 900 pound gorilla stands quietly in the corner. People see it, but they take little notice.
Soon we will be watching the first presidential debate. Could it be possible that that the debate’s specially chosen, highly experienced interrogators will continue to avoid mention of the fiscal cliff? And will it be possible for the candidates to continue promising to increase jobs when another recession looms? Based on the 2012 campaigns so far, the answers appear to be yes.
Republicans pledged not to raise taxes. Democrats are pledged not to reduce any entitlements. If both remain true to their pledges, our economy rolls off the cliff. Federal spending will be cut by about $100 billion. Taxes will rise by nearly $400 billion, on everybody—the rich and not-so-rich. The AMT will expand; the Bush tax cuts will expire; payroll tax cuts will expire; and the new Affordable Care Act taxes kick in. The CBO predicts a reduction in GDP large enough to cause another recession.
Congress slipped out of town this week with hardly a mention of the cliff. It and the president will presumably try to find an answer to the cliff problem in the lame duck session which follows the election. But, solutions will not be any easier then. The players, Congress and the president, are the same. Their pledges have not changed, and the problems are the same. And the lame duck Session is short, about 6 weeks, including Thanksgiving and Christmas.
If, at the end of year, the gorilla is still standing around, the new Congress and the new, or renewed, president still have a little time to work something out. The tax cuts are supposed to expire and the spending cuts are supposed to be effective after Dec. 31, 2012, but government always finds ways to cover the clock.
The players may be different after January 1, but the odds are that the government will still be divided. Each party will still be able to stymie the other, and the party pledges will not have changed much. Worse, time will still be the enemy. It takes lots of time to work out complicated legislation involving the thousands of moving parts of all spending and tax laws.
That means both branches, both parties, and both houses will have to make some promises about what they are going to do about the debt/deficit problem in the next year, 2013. Unfortunately, the recent history of such promises shows that they are almost never kept.
In the meantime, the one segment of our economy that has begun to take notice of the gorilla is the financial industry. The markets, and the rating services, have sounded the alarm about the financial cliff, and that notice has filtered through to the leaders of America’s largest companies. The gorilla now frightens them, and, in general, they have shown little inclination to open up their treasuries to new hiring and new investment.
The gorilla, ignored by the press, shunned by the politicians, is not unknown to the public. The people know the beast is present, and are vaguely uncomfortable about it. So far, it does not appear to have broken any china, and the public has not associated it with the slow recovery. It’s an ugly animal, but its presence seems almost benign, and it’s been around long enough to seem almost a part of the family.
If the debates, or the campaigns, were to stress the critical importance of the fiscal cliff, public pressure would at best force some sort of major compromise in the lame duck session. At worst, it would press the policymakers to accelerate their negotiations early in the new year.
If our political campaigns cannot recognize critical issues, and our electorate does not demand solutions, our democracy is losing its way. Our politicians, our press and our electorate need to acknowledge the gorilla, and jointly make immediate plans to return him to confinement in the national zoo.