If Congress Can’t Cut a Fiscal Deal, Game Over

If Congress Can’t Cut a Fiscal Deal, Game Over

iStockphoto/The Fiscal Times

In the aftermath of the election, we can now look forward to our political class in Washington addressing issues that have reached crisis proportions.  The huge deficits of the past four years have driven up the national debt by more than five trillion dollars, and even the rosy White House budget projections for the next decade show us returning to trillion-dollar annual deficits within a few years.  Entitlement programs continue to grow exponentially as the population ages, with fewer workers to fund the future liabilities that threaten to swallow most of American GDP in coming decades. 

The US has to unwind one war while remaining vigilant about defending against a host of new, unknown enemies who can destroy our country through cyber warfare and other nefarious means.  On top of this, a chronically stagnant economy with historically low levels of employment in the population threatens our ability to fund any of the above objectives, even if we had fiscal stability in the federal government.

What’s the solution?  According to an increasing number of people … another election.
We are used to our political class playing “kick the can” when it comes to big problems.  The fiscal cliff has presented itself on two other occasions – December 2010 and August 2011 -- and in both cases the same Congressional leadership and President that got elected in 2012 opted not to solve it. The crisis in unfunded entitlement liabilities has been apparent for years longer than that for anyone who can do math, yet most politicians either deny the problem outright or claim that no action is needed until the inevitable crash comes.


This post-election season has brought forth a new kind of obstinacy, however.  It’s one thing to delay negotiations on issues in order to use them in election arguments, waiting until voters have their say to see whether a mandate develops.  It’s quite another to refuse to negotiate on big issues even in the immediate aftermath of an election, demanding total surrender or obstructionism as the only two options.
Blame for this new kind of political trench warfare can be spread to both parties.  Democrats led by Patty Murray, the new Senate Budget Committee chair, insist that they won’t cut spending or address entitlement reform without Republicans caving on tax hikes.  Murray has emerged as a leader of the “let’s go over the fiscal cliff” caucus in the Democrat-controlled Senate, stating last week that  raising taxes takes a higher priority over her new job to produce a budget in the Senate. She won’t budge on a budget until Republicans cave.
At the same time, Democrats refuse to even discuss entitlement reform as part of a larger fiscal solution.  Dick Durbin mentioned it on Sunday, only to backpedal Monday and insist that entitlement reform negotiations would only come after a Republican surrender.  Meanwhile, other Democrats argue that the fiscal cliff is more of a slope, and that they can blame any ill effects on Republicans anyway.

Republicans went into the election arguing explicitly that tax hikes would damage the economy at any income level and that massive spending cuts were necessary, although they offered an approach to tax reform that would generate more revenue.  The GOP held the House but lost seats, while losing ground in the Senate and losing the White House to Barack Obama again, who argued almost entirely the opposite. 

Has that changed the direction of leadership? Yesterday, Republican leadership insisted that they would not budge.  John Boehner told his caucus to quit talking about deals on tax rates, telling them to stick to the party line.  “We’re fighting for spending cuts,” Politico reported Boehner’s message. “We’re fighting against increases in tax rates that destroy jobs. And we’re fighting for pro-growth tax reform and entitlement reform, the keys to economic growth.” 

Conservative commentator Marc Thiessen argued at the Washington Post that Republicans should take Patty Murray up on a jump off the fiscal cliff, because the results would end up damaging Democrats more than Republicans.

Obviously, I tend to agree with the Republican direction on economic policy.  Raising taxes won’t solve the fundamental problems in the federal budget structure.  A hike on the top levels could have an adverse impact on investment, although it’s arguable whether that would be any worse than the damage to investor confidence if Congress and the White House can’t solve these issues on the third try.  However, Republicans only control one of the three loci of power in Washington, and even that power got sapped slightly in terms of seats in the House. 

Democrats, including Obama, hold two loci of power – but they can’t get their tax hikes passed without the House, and that means addressing Republican concerns on entitlements and spending.  In an editorial yesterday, the Washington Post scolded Democrats for “maximalist” strategies to avoid dealing with both issues.

Perhaps this sounds hopelessly nostalgic, but most of us recall when elections had consequences, and problems got addressed through normal compromise.  Voters in this election supported split government, expressing a desire for middle ground.  Yet none of the leadership in Washington seems to understand this, and voices on both sides have begun arguing for strategies that would force gridlock all the way to another election. 

This is not only absurd, it’s dangerous.  The impact of going over this cliff will cost the economy $200 billion in consumer spending alone, according to the White House’s own numbers, which would almost certainly push us into a full-fledged recession, or worse.   But the damage to the political system might be even more long-lasting.  We do not have a parliamentary system for guaranteed winner-take-all outcomes, but a system that usually produces stability and the need for finding at least enough common ground to govern properly.  If that system is perceived to fail, don’t be surprised to hear extreme voices proposing extreme measures to rectify those failures.

The core of this standoff is the budgetary process in Congress, which has run off the rails for more than three years.  Despite the requirements of the Congressional Budget Act of 1974 that both chambers produce a budget resolution each year, the Senate under Democratic control has refused to do so since 2009.  Instead, Senate Majority Leader Harry Reid has opted to litigate budget conflicts through high-profile standoffs and crises, rather than through the normal process of budget adoption and conference committees. 

While there is plenty to dislike about conference committees and budgeting, it traditionally allows for rational compromises on key differences without turning each of them into crisis points.  The House under Republican leadership has produced a budget each year, but the Senate refuses to do so, even though a simple majority can pass budgetary bills, which cannot be filibustered.  It is long past time for Democrats in the Senate to prioritize budgets over hobby horses.

Voters send politicians to Washington to solve issues, not find ways to obstruct until they can elect more of their own party.  It’s time for both sides to accept the consequences of this election, end the campaigns, and start providing solutions.