Depending on to whom you are inclined to listen, the fiscal cliff negotiations are either popping like Vesuvius or winding their way steadily toward a successful conclusion.
The negative stories are easy to find. Discussions between the two sides has become acrimonious.
The President put forward a proposal that entails substantial up-front tax increases (that is, failure to extend the expiring 2001 and 2003 tax cuts for upper-income people) along with smaller and not-yet-specified future spending cuts. His proposal includes a permanent change in the handling of the debt limit, making increases automatic unless negated by the Congress, but with that negation subject to a Presidential legislative veto that can be overturned by the Congress only with a two-thirds vote of both chambers. Republicans are upset on all counts. With virtually no spending restraint on the table with the President’s fingerprints, Democrats exult in that Republicans are more likely to need to specify what they want, and therefore to take responsibility.
So Republicans have reacted by taking a harder line on tax increases. That angers Democrats, who believe that this reneges on past pledges, and fails to recognize the verdict that Democrats believe the voters rendered in the presidential election.
The legendary Dave Zinkoff was for decades the PA announcer at the Palestra, the University of Pennsylvania’s basketball arena. A routine of “the Zink” was to announce the license number of a parked car in the Palestra lot that was left with its lights on, and to add “…they’re getting dimmmmmmmerrrrrrrrrrrr.” Well, the fiscal cliff countdown clock is still ticking, but it is getting lowwwwwwwwwerrrrrrrrrrr.
The happy story is harder to find. But it is based on incentives: The President does not want to begin his second term with renewed recession; he wants a chance to govern and pursue his agenda outside of an emergency environment. Republicans know from experience that the presidential pulpit can be an unbeatable PR platform in a Washington standoff. They recognize that as a result they could be branded effectively as chancing a financial crisis solely to protect the tax cuts of the very well-to-do. So both sides have good reason to achieve a deal.
On the other hand, the party leaders are responsive to their rank and file. And there are many Members of Congress in this polarized environment who do not want to give an inch, fiscal cliff be darned. Probably most of those are Democrats. The reason is that, with all the precincts reporting, it looks like Democrats cut a better deal when the 2011 debt-limit legislation created the fiscal cliff. Both parties have things they want on the chopping block. But the consensus is that Democrats can more easily withstand the political hit from the cuts to domestic discretionary spending than can Republicans to defense. If all of the threatened tax cuts expire, Democrats probably have the better bargaining position to get the moderate-income provisions restored quickly, whereas Republicans will be left begging for the upper-income tax cuts. Furthermore, Democrats have a cooperative President who can use his administrative tools to ease the impact on his constituency.
So it is not the biggest surprise that some Democrats have gone on the record advocating going over the cliff, but very few, if any, Republicans have. To be sure, those who talk about hanging tough always say that they believe that the other side will capitulate shortly after the turn of the year, and order will quickly be restored.
But for all of that, this is no way to run a railroad, regardless of which party you prefer, or which side of the bargain you are on. The world economy is staggering. The housing market is just finding its feet, maybe. The financial sector might be recovering. We don’t need to run this risk. This is the kind of situation when, in the old days, George Mitchell, or Tom Daschle, and Howard Baker, or Bob Dole, and Russell Long, or Bob Packwood, would go into a closed room and hash out their differences. Now, we are waiting to see whether the deal will be cut before the Christmas tree dries out.
Again, to some, the ride over the cliff is just a negotiating tactic. They are sure that the issue will be settled once they show the other side just how tough they are, whether before or after all of the tax and spending triggers are pulled. But they are willing to take that chance.
Will we have an economic and financial cataclysm if the two parties bluff their way to a ride over the fiscal cliff? Probably not.
Will you die if you play Russian roulette? Probably not. Heck, only one chance in six.
So go ahead. Play Russian roulette. It will make for a great story you can tell at future cocktail parties. Probably.