The Fiscal Cliff: What's at stake

By EDITORIAL  |  November 14, 2012

If the just-concluded national election proves anything, it is that the Republican Party lives in a parallel universe, with its own brand of reality that is dangerously disconnected from the experience of most Americans.

Republican Mitt Romney's honest-to-goodness shock at the news that he lost the White House to incumbent Barack Obama is perhaps the most compelling piece of evidence that the GOP is from planet Zog, while the rest of us make our home on, well, Earth.

Those who live in the real world unfortunately do not have the luxury of sitting by and watching while Republicans will themselves into total irrelevance and ultimate oblivion. Some sort of bargain or compromise must be struck with the GOP members who control the House of Representatives.

If such a deal is not made, then early next year, the nation will totter off its wobbly economic recovery and fall back into a deep recession, sending the still-too-high unemployment rate even higher, and whacking the average American worker with a tax increase that is estimated to range between $2,000 and $3,000.

That's the bottom line of what will happen if Washington allows the nation to fall over what is popularly known as the "fiscal cliff."

Ben Bernanke, the chairman of the Federal Reserve, coined the phrase in 2011, when Congress made what in effect was a suicide pact with itself after common sense failed to bring about an agreement on how to deal with the spiraling federal deficit, which next year will reach its $16.4 trillion ceiling.

The term "Congress" should be used loosely. The compromise of agreeing to put a gun to its own head was reached because House Republicans were adamantly opposed to repealing the Bush tax cuts enjoyed by the most affluent — those with annual family incomes higher than $250,000.

Eliminating the Bush tax cuts would produce $4 trillion in revenue, but that was too sensible a solution. The GOP obviously felt this would set a bad example for the 47 percent, which does not make enough to pay federal income tax, and the balance of working-class and middle-income families who pay higher rates than big earners. Making the have-nots lust for the lower rates of the haves would build character in the Republicans' interplanetary scheme of things.

The president has quite rightly told the nation that he was re-elected because he promised to raise taxes on the wealthiest Americans, so he will not back down from doing so.

How the GOP will respond to this gambit remains to be seen. House Speaker John Boehner has made a few soothing noises, but no one — given past history — should put too much stock in those.

Obama has more leverage in this round of negotiation than he had in the last. The Bush tax cuts are set to expire on January 1, 2013. By doing nothing, Obama will be able to say he kept his tax pledge.

The problem is, this narrow win would trigger economic calamity — setting in motion previously agreed-upon spending cuts of $175 billion and raising taxes on the not-so rich by $530 billion. This double whammy would shrink the economy by about 5 percent, erasing all the gains — and maybe more — of recent months. (What were those morons thinking?)

Thus Obama, who took office four years ago amidst the greatest economic crisis of our time, returns to office facing a prospect almost as grim. In moving forward, the president should expect only minimum cooperation from the Republicans — if that. Obama must make it clear to the nation that he will maximize every unilateral power at his disposal if the previously unreasonable GOP fails to act prudently.

Related: Too soon, Local heroes of 2011, Museum dreams, More more >
  Topics: The Editorial Page , Republican Party, Money, tax cuts,  More more >
| More

Most Popular
Share this entry with Delicious
  •   MERCY AND SAL DIMASI  |  March 13, 2013
    When it comes to showing a modicum of mercy to some of those convicted of federal crimes, Barack Obama is shaping up to have the worst track record of any president in recent memory.
  •   NEXT, MARRIAGE EQUALITY  |  March 05, 2013
    On March 27 and 28, the US Supreme Court is scheduled to hear arguments in two cases that could essentially put America on the road to full marriage equality.
  •   THUS SPAKE MARKEY  |  February 26, 2013
    Last week, Congressman Ed Markey inadvertently injected some daring political thinking and a touch of historical imagination into the race to fill the US Senate seat vacated by John Kerry's appointment as secretary of state.
  •   DRONES: 10 THOUGHTS  |  February 20, 2013
    Foreign drone attacks are almost (but not quite yet) as American as apple pie.
    America is a prisoner of the War on Terror, which military and diplomatic policy makers once called the Long War.

 See all articles by: EDITORIAL