September 12, 2012
The nation may be barreling towards a fiscal cliff that has policymakers in Washington gnashing their teeth and wringing their hands, but lawmakers just returning from a five-week congressional recess say the crisis hasn’t quite penetrated the consciousness of many of their constituents.
For sure, there’s a lot of fretting about the $16 trillion in federal debt, the prospects of rising taxes by the end of the year, and the persistent pain and fear about high unemployment.
But even in this highly charged political season, the threat of a year-end perfect storm of expiring tax cuts and massive defense and domestic budget cuts that could push the economy back into a recession largely remains a preoccupation of congressional and administration officials, budget wonks and the news media, according to lawmakers.
THE COMING FISCAL STORM
“I think your average person is just starting to learn about the implications of the fiscal cliff,” said Sen. Kelly Ayotte, R-N.H., who held three town hall meetings during the break that focused on fiscal issues. “There is a real concern in general about [inaction] in Washington. There’s a feeling there is no resolution of our fiscal issues and there doesn’t seem to be people working together in terms of addressing the economy.”
Sen. Rand Paul, R-Ky., says that businessmen and average voters are freaking out over the prospects of a sharp tax increase next January, if Congress and the White House fail to intervene to block the expiration of a raft of major tax cuts. “I really don’t know any voters in Kentucky who want their taxes to go up,” he said repeatedly.
And Sen. Dianne Feinstein, D-Calif., frets that “There’s a lack of understanding” among many Californians that deep automatic cuts in the Pentagon budget that are scheduled to take effect in January – the dreaded “sequestration” – could cost her state as many as 225,000 defense-industry jobs, according to one estimate.
“My own view is that sequester was a very bad idea and it ought to be at least postponed for six months,” she said.
ANOTHER RECESSION IN THE MAKING?
Lawmakers and fiscal policy experts are voicing deep concern that the nation is headed for an extraordinary fiscal disaster in early January when more than $1 trillion of automatic spending cuts– equally divided between defense and domestic programs – are scheduled to begin. At the same time, Bush era tax cuts and other tax breaks are set to expire. The Congressional Budget Office, Federal Reserve Chairman Ben Bernanke and other policy experts warn that the combination of the deep spending cuts and the sudden surge in taxes could spur another recession.
The automatic, across-the-board spending cuts or sequestration were approved by Congress and the Obama administration in July 2011 as part of major legislation to raise the debt ceiling while reducing the long-term deficit. The automatic cuts were to take place if a super committee of House and Senate members failed to agree among themselves on how to achieve those long-term savings. The committee disbanded late last year after failing to reach agreement. Now the Budget Control Act requires $1.2 trillion in automatic cuts over the next decade, with the first $109 billion taking effect January 2.
Since last year’s deal, however, many Republican and Democratic lawmakers, Defense Department officials and budget experts have come to regret the action. They fear it will lead to a hollow military force, the loss of more than a million jobs the defense industry, and hardships for members of the military and their families. Last weekend, Republican presidential nominee Mitt Romney sharply criticized congressional Republicans for going along with sequestration.
“This sequestration idea of the White House, which is cutting our defense, I think, is an extraordinary miscalculation," Romney told NBC’s "Meet the Press" in an interview that aired Sunday. "I thought it was a mistake on the part of the White House to propose it. I think it was a mistake for Republicans to go along with it."
Yesterday, Senate Republican Leader Mitch McConnell of Kentucky declined to respond to Romney’s criticism. But House Majority Leader Eric Cantor of Virginia told The Fiscal Times that Obama forced Republicans into a corner last year by insisting on sequestration as a way of avoiding further contentious debt ceiling votes before the November election.
“The president was unwilling to agree in any way, shape or form of resolving the debt ceiling crisis without getting through the election,” Cantor said in an interview. “It was a purely political move to get him through the election, and this is the only way he would do it. None of us wanted to see this country drive off a cliff. “
CONGRESS GOES TO WORK--FUNDRAISING
As Congress returns to work this week, most members and leaders believe that nothing will be done to avert a possible year-end calamity until after the election, when it will be clear whether President Obama hangs on to the White House or makes way for Romney, and whether the Democrats can retain control of the Senate.
If Romney and the Republicans sweep to control of the presidency and Congress, then there would be no incentive for them to negotiate with the Democrats on a large tax reform and spending plan until they take control early next year. If Obama and the Senate Democrats hang on, then the Republicans would have more incentive to try to negotiate a major budget and tax deal in a lame duck session of the 112th Congress.
For now, it appears that Congress will do the minimum in the next week or so – including passing a $1.05 trillion stopgap spending measure to keep the government afloat for the next six months -- and then go home to campaign.
“I think it’s obvious with the few number of days we have left…that we’re going to have to wait until after the election,” said Sen. Pat Roberts, R-Kan. “I don’t know what’s going to happen in a possible lame duck. But that’s a can we can’t kick down the road forever. And there are ominous portents across the board.”
Roberts and Sen. Ben Nelson, D-Neb., said that farmers and ranchers in their states are worried that Congress will adjourn without enacting new farm legislation and drought relief because of conservative GOP opposition in the House.
“People back home have gotten used to the fact that the House has an agenda to bring the country to its knees so that it will come to its senses,” said Nelson, who is retiring at the end of the year. “This is like the idea that came out of Vietnam that you have to destroy the village to save it. This nonsensical agenda is making its presence felt.”
Cantor strongly disagrees, insisting that House Republicans took action this year “to say here’s our solutions to avoid sequestration so we can put other cuts in place instead of disproportionately affecting the Pentagon,” but that “unfortunately, we have not seen again any solutions, any ideas from the other side.”
Rep. Howard Berman, D-Calif., said as the clock ticks towards potential fiscal disaster, many in his congressional district sense there is something wrong but have little appreciation of the extent of the problem.
“I don’t want to overstate the [voters’] consciousness of the deadline [of expiring taxes and spending cuts] coming up,” he said. “The biggest sense is that we are not working things out [in Washington]. They think something is real wrong, but I don’t think they have an elaborate notion of what expires in January in great detail.”
And in Mississippi, the fiscal cliff couldn’t be further from people’s minds, according to Sen. Thad Cochran, R-Miss. Cochran attended a football game last weekend at the University of Mississippi at Oxford, and mingled with voters. “They’re worried about the [football] season ahead,” he told The Fiscal Times. “They’re playing Texas next week. So that was the reality in Mississippi.”