As 2013 dawns, the greatest immediate threat to the nation's economy is the Congress. Lawmakers were closing in on a deal yesterday to avoid the "fiscal cliff" of tax increases for all and indiscriminate spending cuts starting Jan. 1, but it remained uncertain if they could achieve it. Failure would deliver a blow that economists say could drive the nation back into recession.
Even if there were a deal before the ball dropped in Times Square, Congress was down to playing "small ball." Negotiators worked yesterday to spare the middle class from tax hikes and extend jobless benefits. But any deal wouldn't include the tax reform or spending constraints in Medicare and other entitlements the nation needs. It's a familiar pattern.
The die was cast in 2001 and 2003 when the Bush tax cuts were enacted with a provision for them to expire in 2010. The sunset was a gimmick to mask that making them permanent was unaffordable. But in 2009 Congress extended the cuts to 2012 in a deal with the White House that also cut payroll and other taxes. Tax revenue, as a percentage of the economy, is now the lowest it has been in six decades and spending the highest, so deficits have grown explosively.
Subsequent deficit-reduction efforts went nowhere. President Barack Obama and House Speaker John Boehner failed to close a $4-trillion "grand bargain" on taxes and entitlements in 2011, even as a refusal by Republicans to raise the federal debt ceiling pushed the government close to defaulting on its bills. The deal to avert default -- the Budget Control Act -- created a "supercommittee" to reduce deficits. That failed too, triggering $120 billion in automatic spending cuts in 2013 supposedly so noxious that Congress would be forced to act to avoid them. It hasn't, so here we are, over the cliff. Even if Congress avoids a long fall, the next crisis will come in February when the debt ceiling will have to be raised again.
So the new year may start off much like the old ended, with an epic failure to govern.