Editorial: Back away from the 'fiscal cliff'
Avoiding the "fiscal cliff" of tax increases and automatic spending cuts that threaten to tip the economy back into recession will be the first test of post-election pragmatism for Washington. One it must pass.
President Barack Obama, House Republicans and Senate Democrats have to find enough common ground to chart a course that restrains spending, reduces deficits, reforms the tax code while increasing revenue, and accomplishes all that without compromising economic growth or job creation. And with destructive tax hikes and indiscriminate spending cuts set to begin Jan. 1, there isn't much time for the lame-duck Congress to get it done.
What absolutely cannot be allowed is a repeat of the intransigence and brinkmanship that characterized the 2011 debt ceiling crisis, which ended with passage of the Budget Control Act and set the government on course for the fiscal cliff officials now desperately want to avoid.
The election didn't change the set pieces that led to past stalemates. Obama is still the president, Republicans are in the majority in the House of Representatives and Democrats in the Senate. But the political atmosphere has changed. It's clearer than ever that the public is fed up with partisan paralysis and, by a slim but decisive majority, favors Obama's balanced approach to deficit reduction.
In the days since the election, Boehner has signaled some flexibility on taxes. The House Republican majority still won't buy any plan that raises tax rates, but Boehner says it will support raising additional revenue through tax reform that lowers rates, closes loopholes and limits deductions. That's a widely promoted blueprint for reform and a realistic opening bargaining position.
Obama, his hand strengthened by his re-election, has reiterated his pitch for extending the Bush tax cuts of 2001 and 2003 for the middle class, while allowing them to expire at the end of the year for the highest earning 2 percent of taxpayers. But he invited congressional leaders from both parties to the White House this week to begin hashing out a deal with the goal of $4 trillion in deficit reduction over the next decade, and said he's willing to compromise on how that's achieved. That's a step in the right direction.
Both sides need to bargain in good faith. The stakes are too high for anything less, given the fiscal policy pileup in January if no deal is struck. Tax rates would rise across the board. The alternative minimum tax would saddle an additional 26 million taxpayers with higher income tax bills for 2012. Both military and nonsecurity domestic spending would be slashed haphazardly. And the federal government would again bump up against its debt ceiling. Going down that path would push the economy back into recession, according to the nonpartisan Congressional Budget Office.
Obama needs to take the lead. He should put a plan on the table for tax reform and spending cuts, including reining in the cost of Medicare and Medicaid. Without details, it's difficult to judge the best way forward. But it must be found. The nation is yearning for better days.