A thumb-nail assessment of the fiscal cliff bill: Much sound. Some fury. Simplifying nothing.
Nonetheless, those members of Congress who worked together in a bi-partisan fashion to construct and pass the "cliff deal" are to be commended. The major presenting short-term problem of the expiration of "middle class" tax cuts was addressed. Significantly and appropriately, tax rates for the "wealthy" were increased. In addition, the alternative minimum tax was corrected, expiring jobless benefits were extended, and cuts to Medicare reimbursements were prevented.
The congressional compromise pulled us back after we went over the cliff for a very short period of time. The sad truth, however, is that we are still cliff dwellers. Much more remains to be done than got done with this bill.
Consider the following: The sequestration process for automatic budget cuts to defense and domestic programs has been extended by only two months. Social Security, Medicaid and Medicare solvency and management remain wide open issues. The debt ceiling debate has raised its ugly head again. And, most importantly, job creation and economic growth do not appear to be central to the ongoing deficit and debt discussions.
Erskine Bowles and Alan Simpson, co-chairs of the Deficit Reduction Commission stated that the fiscal cliff bill was "truly a missed opportunity to do something big to reduce our fiscal problems." We agree with Bowles and Simpson that the bill was not "something big".
In no way could this be considered a grand bargain. On the other hand, given the composition of the 112th Congress and its track record over the past two years, a grand bargain in this constrained a time period was probably impossible because of the grand canyon - i.e., the ideological chasm - that separated the extreme tea party conservatives in the House from the Democrats and even their more moderate Republican brethren.
Looking at it objectively, the fiscal cliff bill contains elements and produces consequences that offend partisans on both sides of the aisle. While the middle class tax breaks were protected, the payroll tax break was eliminated. It is estimated that this will cost "an average of $1,000 for a household at the national median income." While "new taxes" were on the table, spending cuts were off. The bill generates $620 billion in new tax revenue which seems like a lot but pales in comparison to what is required. Moreover, the Congressional Budget Office estimates that the bill will reduce revenues over 10 years by $3.64 trillion and increase spending by $332 billion.
So, the bad news is that we are still cliff-dwellers. The good news is that the cliff is no longer the exclusive province of those within the Beltway. It is now occupied by the American public and voters as well.
The results of the national elections sent a loud and clear message that the public is expecting and demanding compromise. They also sent a message that it would be unacceptable to extend the Bush era tax cuts uniformly. Finally, they sent the message that the voters are and will pay close attention to the negotiation processes surrounding the cliff and the behavior of our elected officials in resolving the debt and deficit crisis.
The passage of the fiscal cliff bill with an overwhelming bi-partisan majority in the Senate and a sound bi-partisan majority in the House is a clear sign that many in Congress have gotten the message. Let us hope that this collaborative action by the departing 112th Congress is a harbinger for the 113th.
Right after the elections, the Pew Research Center conducted a survey that revealed that in general the voters were "pessimistic about partisan cooperation" in politics going forward. As we start this New Year, Congress has given the citizenry a small reason to replace this healthy skepticism with guarded optimism.
As it continues its cliff-work over the next 100 days, Congress will determine whether that optimism is warranted. It should be aware that the cliff dwellers will be watching. The dwellers will also be anxiously waiting for Congress to move off the cliff in order to scale the economic summit.
A year-end Washington Post-ABC poll showed that 75 percent of the registered voters responding felt that the "economy is still in a recession." If that is the perspective from those at the bottom and the middle of the cliff one to two years from now, all of the pick and shovel work done to try to address the debt and deficit crisis by only focusing on cost-cutting and shrinking government will have been in vain.
Congress needs to be about more than green eye shades and expense reduction. It also needs to be about investing and revenue generation. Congress needs to finish its fiscal work successfully and quickly and then pass legislation that will stimulate job creation and growth and development of the economy for the middle class and the working poor.
The American people deserve this. They should be given the opportunity to be mountain climbers rather than cliff dwellers.
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