Fiscal Cliff: Lawmakers May Push Deadline to 2013
Printer-friendly versionPDF version
a a
 
Type Size: Small
Richard Cowan
Reuters
September 25, 2012

Slowly and quietly, the U.S. Congress may be arriving at a consensus on how to avoid falling off the "fiscal cliff" on December 31 - by simply putting off its own deadline for most of the major year-end budget and tax decisions.

That approach would delay the day of reckoning while also allowing more time for compromise in a Congress that has battled for two years over how best to reduce huge budget deficits.

No formal agreements have been reached, however, and turning a consensus into an actual deal that avoids jolting the markets or economy will depend on the results of the November 6 general election.

The "cliff" refers to the year-end deadline for the expiration of hundreds of billions of dollars worth of tax cuts and the triggering of $109 billion in across-the-board spending cuts. The non-partisan Congressional Budget Office has said the scenario could throw the country into recession. Congress created the hazardous end-of-year deadline in August 2011 when it agreed to a deficit deal as a way out of a deadlock over raising the U.S. debt ceiling.

RELATED:  What Is the Fiscal Cliff and Why Should We Care?

In recent weeks, lawmakers of all political stripes, from conservative Republicans to liberal Democrats in the Senate and House, have alluded to surprisingly similar hopes for the high-stakes "lame-duck" work session that will follow the November presidential and congressional elections.

They would put aside the $109 billion in "automatic" across-the-board spending cuts that otherwise would hit military and domestic programs equally. They would make some new, possibly smaller down payments on deficit-reduction for the near-term. Then they would write a new deadline - maybe March 31 or June 30 - to come up with a grand, $4 trillion deficit-reduction program over 10 years; and devise a new method for forcing a divided Congress to act. The entire exercise would be aimed at finding a long-term fix for U.S. fiscal problems without the jolt of indiscriminate spending cuts and tax hikes that would occur under current law.

RUNNING FOR COVER
The threat of a possible recession after such blanket spending cuts now preoccupies Washington. Among the fearful are the big-company CEOs represented by the Business Roundtable, for example, and Ben Bernanke, the chairman of the U.S. Federal Reserve, who briefed members of Congress this week after declaring that "I don't think our tools are strong enough to offset the effects of a major fiscal shock" of the cliff.

The Fiscal Times FREE Newsletter

Newsletter

The most vocal Democrats and Republicans in Congress have turned the floors of the House and Senate into pre-election spin rooms as each side tries to pin the blame on the other. But a stream of ideas to delay the December 31 day of doom floats through Capitol Hill brainstorming sessions:

* Liberal Democrat Dick Durbin, the second-ranking Senate Democrat, has alluded to a six-month delay, coupled with a $40 billion to $50 billion deficit-reduction down payment for the first half of the year.

* Conservative Republican Senator Lindsey Graham has touted a "mini deal" in November or December to delay decisions through March. It would contain a $20 billion deficit cut.

* Senate Budget Committee Chairman Kent Conrad, a longtime Democratic deficit hawk, said the "optimum outcome" would give Congress six more months to work out details on revamping the tax code and big government programs like Social Security and Medicare. In the meantime, Conrad wants Congress to strike a "framework agreement" during the lame duck session on a 10-year plan for $4 trillion in deficit reduction. He also wants a deal during the lame duck session on "hundreds of billions in revenue and spending to demonstrate credibility" on deficit-reduction, as well as new enforcement procedures if lawmakers fail to act or put up procedural hurdles. It's a tall order for a short session.