Over the Cliff
To: President Barack Obama
Governor Mitt Romney
Dear President Obama and Governor Romney:
This is being written before we know the results of the election, but frankly, given the leadership our country requires to avoid a looming financial catastrophe, the results won’t matter very much—we need you both.
Yes, we’re talking about the “fiscal cliff,” a phrase that at least given your campaign rhetoric, dare not speak its name. In fact, a word search of both of your acceptance speeches and public reported speeches shows that the phrase is mentioned approximately as often as “Big Bird.” Perhaps a little recent history will refresh your recollections.
Last summer, we had a truly absurd imbroglio over extending the United States’ debt ceiling—authorizing borrowing more money to pay the bills that the federal government had already incurred. Every elected officeholder close to a microphone promised to get serious about reducing the deficit. You know how that worked out.
As a result, Congress set up a so-called supercommittee to come up with a long-term budget solution. It was further stipulated that if the super-committee failed in this task, a trillion dollars of automatic spending cuts, known as “sequestration,” would go into effect. These cuts, to take place on January 2, would be split roughly equally between the defense budget and domestic spending—something that no congressman would allow and consequently, a budget deal would be forthcoming.
It was not. But these trillion dollars are only part of the “hit” that will impact all of us lemmings as we plunge leaderless over the cliff.
It gets worse. Taxes will also be increased dramatically because the temporary tax cuts enacted by then-President George W. Bush in 2001 and 2003 and extended for two years by President Obama will run out on December 31. The payroll tax holiday and extended unemployment benefits will also run out on that day.
To make matters even worse, the alternative minimum tax is scheduled to hit 30 million middle-class Americans next year, while Medicare, lacking a so-called “doctor patch,” is scheduled to slash payments to doctors by nearly 30 percent. Former Labor Secretary Robert Reich, writing in the Financial Times, summarized the impact of these various policies as equivalent to 5 percent of the entire U.S. economy. The Congressional Budget Office projects that if you take us over this cliff, real economic growth will drop at an annual rate of 2.9 percent, and unemployment will rise to 9.1 percent by the end of next year. Former Senator Alan Simpson likened this situation to “America being the healthiest horse in a glue factory.”
If this is truly news to you, whoever has won the election is probably now asking for a recount. But this is also an historic opportunity for the two of you to lead us out of this problem. Let me explain.
Neither of you have been close to Washington, DC, for weeks at a time, preferring to live in either Ohio or Florida. But now that the election is over, it is time for the lame-duck session of Congress. This is exactly the body that should vote for a grand compromise because many of the members who can take a bipartisan approach will not be returning to Washington after January. More to the point, neither will one of you. Thus, bipartisan leadership and political “cover” are available for whoever will be leading the country in the next four years.
The fiscal cliff is a problem of our own creation, and we are not mindless lemmings. The outlines of a grand compromise to enact a $2 cut in entitlements for each $1 increase in revenue, while broadening the income tax base by deleting tax expenditures, is well-documented. Serious economists on both sides of the aisle have produced a number of workable plans. One would hope that success in avoiding immediate catastrophe would encourage bipartisan compromise to achieve longer-term economic success, reducing burdensome regulations and simplifying the uncompetitive tax structure. The president and the governor, or the president and the president-elect, working with a Congress that could convene before January 1, can provide each other with the political cover to accomplish these bipartisan solutions.
America can work again. Ironically, the defeat of one of you could lead to a victory for all of us.
Vance K. Opperman
Not a Lemming
Vance Opperman (firstname.lastname@example.org) is owner and CEO of MSP Communications, which publishes Twin Cities Business.