Fiscal Cliff: Candidates Fiddle While America Does a Slow Burn
October 2, 2012
“Continued split government is just one reason to expect a tough negotiating process around the cliff,” Ethan Harris and Joshua Dennerlein, economists at Bank of America Merrill Lynch, wrote in a recent client note. “Neither party has presented a complete plan for the budget deficit. For example, on taxes, one side [the Republicans] offer specific tax rate cuts but no specifics on closing loopholes; the other offers only a small increase in taxes on the wealthy.”
Scott Brown, chief economist at Raymond James & Associates, stressed on Monday that “the uncertainty could be a negative for growth in the remainder of this year” and things could “get dicey” in early 2013. “There’s a lot of uncertainty here,” Brown said in a client commentary. “However, there’s a clear tradeoff between avoiding the fiscal cliff and reducing the federal budget deficit. You can’t do both.”
SILENCE ON THE NOISY CAMPAIGN TRAIL
Despite the severe warnings, the fiscal cliff — perhaps the most immediate economic dilemma confronting November’s victor — goes largely unmentioned on the campaign trail. There are plenty of platitudes by Obama and Romney about taxes and the national debt, but little or no strategies for navigating the problem.
In a campaign speech Sunday at a Las Vegas high school, Obama drew sharp lines between his approach to the budget and Romney’s outlines; Obama’s words tried to convince voters of his dedication to the middle class and his willingness to work with the other side of the aisle. But what the president leaves unsaid is that the same deal he is touting for having reduced expenditures is what led to the sequestration that threatens to devastate the economy.
“What I want to promote is a new economic patriotism,” Obama said. “I want to reduce our deficit without sticking it to the middle-class and working-class families. My plan would do just that. I’ve already worked with Republicans and Democrats to cut spending by a trillion dollars. I’m willing to do a little bit more.”
Romney has downplayed the impact of the fiscal cliff, should he win in November. The former Massachusetts governor told Time magazine in May that he would seek some kind of extension from Congress on the taxes and sequestration in order to work through the budgetary issues. He said the optimism from his win would be enough to overcome any uncertainties posed by the government.
“If I’m lucky enough to be elected,” he told Time, “the consumers and the small-business people in this country will realize that they have a friend in the White House who is actively going to encourage economic growth, and there will be a resurgence in confidence in this country and a willingness to take risks, to invest, to add employees.”
Ryan Alexander said that the leaders of both parties are shirking their responsibilities to address the crisis head on. His group released a list of more than $2 trillion of programs and tax breaks that could be “safely eliminated from the budget because they are inefficient, ineffective or wasteful.”
Those ten-year cuts include $672.5 billion of national security programs, $126.6 billion worth of farm subsidies and crop insurance, $187.5 billion of transportation projects, and $946 billion worth of tax write-offs – including a reduction in the mortgage interest deduction and elimination of a foreign tax credit.
“There is no way to address the fiscal cliff without making some tough decisions that may cause some voter, somewhere some pain, either by decreasing spending or finding new revenues,” Alexander told The Fiscal Times. “It’s easier for candidates to talk at a big picture level, without committing to decisions that might have to made in the short term.”
Original Publication URL: http://www.thefiscaltimes.com/Articles/2012/10/02/Fiscal-Cliff-Candidates-Fiddle-While-America-Does-a-Slow-Burn.aspx#page2
Discussion
Sign Up for Updates
