President Obama and Congress have less than two months to strike a grand bargain that will step back from the year-end fiscal cliff of $607 billion in tax hikes and budget cuts starting Jan. 1 that could send the nation back into a recession.
Post-election rhetoric by President Obama and House Speaker John Boehner has signalled some willingness to compromise. President Obama called for a balanced approach that would require the wealthy to pay more in taxes, but he did not mention raising tax rates on households earning more than $250,000 annually.
Speaker Boehner continued to oppose higher tax rates, but said he was open to raising revenue, which could come through reform of the tax code rather than hiking rates on any class. Both men agreed entitlement reform had to be part of the deal.
However, Speaker Boehner in a USA Today interview suggested yet another short-tem fix putting a solution into next year.
But it was one extension after another that has brought the nation to the edge of the fiscal cliff. Remember that the Bush-era tax cuts were supposed to expire in 2010, but President Obama and congressional Republicans struck a deal that not only extended them for two years but added other breaks such as the one-year, 2 percentage point cut in the employee Social Security payroll tax.
When that was scheduled to return to the 6.2 percent rate at the end of 2011, the temporary cut was extended for another year. The tax cuts in President Obamas 2009 stimulus plan were continued.
In late 2011, a congressional supercommittee could not agree on a 10-year $1.2 trillion deficit reduction plan as part of a deal to raise the debt ceiling. That set in motion sequestration or automatic spending cuts to take effect Jan. 1. And the debt ceiling will be back on the national agenda early next year.
Speaker Boehner said a lame-duck Congress should not make the decision. The political alignment, though, will not change in January, so why would the prospects for a deal be better next year than now?
Inaction could slow economic growth with a rise in the jobless rate. Middle-income families would see a tax hike averaging $2,000 a household with increases in corporate and business taxes. The uncertainty has businesses holding off expansion and hiring plans.
Further delay is unacceptable. Its time for a deal this year.