Call it a time bomb, or the oft-used "fiscal cliff." Either way,
the powers that be in Washington are dancing close to the edge in
terms of taxes and spending, and if they don't reach consensus on
these pressing budgetary matters soon, all Americans could be in for
a big spill.
Given the high stakes, it has been encouraging to see President
Obama -- newly reelected to a second term -- and the congressional
leadership saying the right things in the days since the election to
address a looming disaster: widespread year-end spending cuts and
tax increases that would be a jolt to the personal pocketbooks of
all Americans.
Those drastic consequences were put in place in 2011 as part of a
deal to persuade Democrats and Republicans to come together to begin
to address what has become an alarming debt and deficit problem in
Washington. The budget deficit for the U.S. government has come in
at more than $1 trillion now four years in a row. The nation's
overall national debt stands at $16.2 trillion.
On Friday, both President Obama and Republican House Speaker John
Boehner stated the obvious: It is time for action. Failure to reach
at least tentative agreement to avoid disaster by year's end will
lead to more uncertainty on Wall Street at just the time the economy
is beginning to show life. The non-partisan Congressional Budget
Office, along with many top economists believe a failure to address
the "fiscal cliff" crisis could result in another recession.
In his statement delivered Friday afternoon from the East Room of
the White House, Obama called for a "balanced approach" in attacking
the nation's fiscal problems. He stuck to the same basic themes he
stressed during the recent campaign. That is, spending cuts combined
with more revenue, and by "asking the wealthiest Americans to pay a
little more in taxes."
Earlier in the day, Speaker Boehner, for his part didn't seem to
exactly embrace that philosophy, instead making a call for "cleaning
up the tax code." Last week, however, Boehner did say he is open to
adding a revenue mechanism to the mix going forward, and added that
"2013 should be the year we begin to solve our debt through tax
reform and entitlement reform."
The president said he has detailed a plan that would reduce the
deficit by $4 trillion over the next decade. We would like to see
him, for once, maneuver such a plan through a highly partisan
Congress. Meantime, he also called for an immediate extension of
middle class tax cuts, so as to take one bit of economic uncertainty
off the table.
"I want to be clear," President Obama said of his deficit
reduction plan. "I'm not wedded to every detail of my plan. I'm open
to compromise. I'm open to new ideas. I'm committed to solving our
fiscal challenges, but I refuse to accept any approach that isn't
balanced."
We don't expect the White House and the lame-duck Congress to be
able to rewrite the nation's tax code and solve the deficit problem
in a matter of weeks. We do expect sensible measures to avert the
immediate challenge, and a bipartisan framework going forward -- an
earnest, nuts-and-bolts kind of approach that addresses government
spending and deficit and debt reduction problems without damaging
the economy.
