As the presidential election campaign grinds its way into November, Republican and Democratic lawmakers are busily hammering their own pitons into the fiscal cliff -- staking out routes that could either force compromise or snap the economy’s safety lines.
The politics are as steep as the economic consequences. The $660 billion jumble of expiring tax breaks and automatic spending cuts scheduled to take effect in early January threaten to shove the country back into recession—a downturn that may be gradual or unexpectedly sudden. The jockeying for position has only increased the uncertainty of what exactly will happen during the lame duck Congress after the Nov. 6 election.
The two parties’ profound differences over economic and tax policy will be front and center tonight when Vice President Joe Biden and Republican vice presidential nominee Paul Ryan meet in Danville, Ky., for a nationally televised debate. With the outcome of the race between President Obama and Republican Mitt Romney now very much in doubt, political leaders back in Washington have begun taking strong positions on spending, entitlements and tax reform in anticipation of a showdown after the election. Who does the negotiating matters almost as much as what the terms of the deal are—and plenty of lawmakers are vying to star in this particular drama.
“Given the size and complexity and the time requirements, you can’t afford to make the circle too big or nothing is ever going to get done,” said Jim Manley, the former press secretary for Senate Majority Leader Harry Reid, D-Nev.
Sen. Chuck Schumer, D-N.Y. a key ally of Reid’s, drilled into the cliff’s ideological divide on Tuesday. To reduce the deficit, the Senate’s third-ranking Democrat called for both higher tax rates on wealthy Americans and closing tax loopholes, dangling in return for Republicans the possibility of cutting Medicare expenses by “hundreds of billions of dollars.”
Senate Minority Leader Mitch McConnell, R-Ky., quickly rejected the offer as a “plan to hold the economy hostage to massive, job-killing tax hikes.” Separately, Sen. Mark Warner, D-Va., is convening a bipartisan “gang” of eight Senate deficit hawks to broker a pact of their own.
The lower tax rates enacted during the administration of former president George W. Bush are the main sticking points in negotiations. President Obama would only continue them for families earning less than $250,000, while Republican nominee Mitt Romney plans to reduce the rates further.
Cut through the posturing and much hangs with five key players during the weeks of the lame duck session—right before the government would clamber over the crest of the fiscal cliff in 2013.
House Speaker John Boehner – As one of the few leaders practically guaranteed to hold the same position after the election, the Ohio Republican favors extending all of the breaks for one year and any increase to the debt ceiling must be offset by spending cuts. Getting a lame duck deal would be “difficult,” Boehner recently told Politico, and “frankly, I'm not sure it's the right thing to do -- have a lot of retiring members and defeated members voting on really big bills."
Treasury Secretary Tim Geithner — Along with White House chief of staff Jack Lew, Geithner will be among the key negotiators if Obama gets reelected. He’s called for laying a foundation in the closing weeks of 2012 to sidestep the cliff. He’s already holding closed-door discussions with House Ways and Means Chairman David Camp, R-Mich., and Senate Finance Committee Chairman Max Baucus, D-Mont.