The fiscal cliff: What if negotiations fail?

Elections have consequences, said Greg Sargent in The Washington Post,even if the Republicans refuse to admit it. On Jan. 1, the Bush-era tax cuts are due to automatically expire, at the same moment that massive spending cuts that both parties agreed to during the 2011 debt-ceiling standoff kick in. All told, $503 billion could be siphoned out of the economy by a plunge off this “fiscal cliff,” which could throw the still-weak U.S. economy back into recession. But as President Obama and the GOP-controlled House of Representatives battled this week over terms of a compromise deal, it’s clear that Obama “is in a far stronger position politically.” He just decisively won an election framed by his insistence that deficit reduction must involve higher taxes on the wealthy, rather than massive cuts in social programs, as Mitt Romney proposed. So weakened is the GOP, said Doyle McManus in the Los Angeles Times, that House Speaker John Boehner and other Republicans say they’ll abandon the famous Grover Norquist pledge never to raise taxes, and are “open to new revenue.”

Listen more carefully, said Ruth Marcus in WashingtonPost.com. Despite their “soothing words about compromise,” Republicans are clinging to their refusal to end the Bush tax cuts for the top 2 percent. They’re offering to bring in new revenue solely by capping an individual taxpayer’s deductions at some arbitrary number—say, $25,000 or $50,000—rather than raising the top tax rate beyond its current 35 percent. Meanwhile, they’re demanding major cuts in Medicare, Medicaid, and Social Security. “Even as an opening bid, this offering is dishearteningly insincere.” Obama has already rejected it, since a cap on deductions wouldn’t meet his goal of $1.6 trillion in new revenue over 10 years.

If Republicans won’t compromise on tax rates, said Daniel Gross in TheDailyBeast.com, Obama should simply let the nation “go careening over the cliff” on Jan. 1. That’s right: Some liberals—call us the “Thelma & Louise Caucus”—believe that letting the Bush tax cuts expire and automatic defense cuts kick in would provide great clarity to the whole budget debate. With Clinton-era tax rates back in effect, Republicans wouldn’t have to defy their sacred no-tax pledge and raise taxes on the top 2 percent, since the top tax rate would already have reverted to 39.6 percent. After Jan. 1, the Democrats have all the leverage.

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As a conservative, I also am in favor of “fiscal cliff-diving,” said Marc Thiessen in The Washington Post. But it’s Obama, not Republicans, who’ll lose leverage after Jan. 1, since the president’s obsession with raising taxes on the rich will lead to big tax hikes for the other 98 percent of Americans, too. At that point, Democrats might be less arrogantly triumphant, and more willing to consider real reform of our tangled tax code, as well to rein in the entitlement and social services spending that everybody knows is bankrupting the nation.

The time for game-playing is over, said The Washington Post in an editorial. The reality is that both Republicans and Democrats will have to compromise, and the agreement they reach, by definition, is going to sit poorly with the “fiscal fundamentalists” in both parties. To get our ballooning debt under control, we are going to need both higher taxes and entitlement reform. “That’s the fundamental truth,” and if our elected leaders can’t face it, the U.S. will take a terrifying “tumble over the fiscal cliff.” Look out below!