Amid the white noise of the election, sometimes the most pressing — but least headline-grabbing — issues fade into the hubbub. One such issue: the "fiscal cliff," the standoff over which says as much about the poisonous state of politics as it does about the US's ongoing economic frailty.
The fiscal cliff comprises the head-on collision of two separate policy initiatives set to take effect on January 1. The first of these is the expiration of $536 billion of Bush-era tax cuts. The resulting tax spike would cut across all income levels, with many economists projecting a $2000 bump in taxes on the middle class. The bottom one-fifth lowest income households would see their tax rate jump from 0.6 percent to 4.3 percent, with a 5.8 percent increase hitting the top one-fifth.
By cutting into the disposable income people have to spend on goods and services, these tax hikes on their own would put a damper on growth. But it's the second component — government spending cuts that would add up to about $1.2 trillion over the next 10 years — acting in concert with the first that makes the fiscal cliff worthy of its ominous nickname.
With growth limping along at an anemic 1.5 percent, pundits worry that the one-two-punch of tax hikes and spending cuts could knock the economy right back into recession. By some estimates, two million jobs could be lost, just as the labor market is showing some faint signs of life.
There's a hawkish fringe out there that's all for this. To hear them tell it, the only way to get the country's financial house in order is to let it go over the fiscal cliff. And while it's true that the tax hikes and spending cuts would shrink the $16 trillion national debt, letting the economy crater just to fix our budgetary woes would be madness.
Thank God, then, that the fiscal cliff is entirely preventable. All politicians have to do to avert it? Show a bit of maturity and cosign a bipartisan bill to extend the tax cuts until the economy is healthy enough for us to revisit balancing the budget.
Ah, but this is America. A nation in which a certain political party handles itself with all the maturity of a coked-up drag queen in a bar fight.
True to form, Republicans have refused to cooperate, and in a staggering feat of projection, blamed the opposition for the very obstructionism they've refined into a science.
Obama has made plenty of gestures towards compromise. He's more than willing to preserve the majority of Bush-era tax cuts. The apparently unthinkable concession he wants in return? That the tax rate on the upper 3 percent of Americans, those making $250,000 or more, revert to its higher, pre-Bush era level.
And yet, despite overwhelming popular support for a tax increase on the richest citizens — who already enjoy historically low taxes and have prospered disproportionately over the past decade — GOP leaders have refused to budge from their ideological high horse. In effect, they're holding a broken bottle the nation's jugular and saying: raise taxes on the rich and the hostage gets it.