Balancing on the edge of the Jan. 1 fiscal cliff
Early next week, staffers for Democratic and Republican leaders in Congress are expected to have proposals ready to outline how the country can avoid the so-called fiscal cliff we’re set to tumble over Jan. 1 if no action is taken.
Then leaders such as House Speaker John Boehner and Senate Majority Leader Harry Reid will take the plans to their respective party caucuses, hoping they can round up enough votes to win approval for some sort of compromise.
The fiscal cliff is the combined impact of massive spending cuts and huge tax increases that are both set to take effect at the beginning of the new year.
To win enough votes from both parties to avoid the cliff, any compromise plan will likely have to include higher tax rates for the wealthiest taxpayers, elimination of some tax loopholes, substantial spending cuts and the beginning of a reform framework for Medicare and Social Security.
There are plenty of obstacles to reaching such an agreement in the current, lame-duck congressional session, but there is reason for optimism, as well.
The cautious rhetoric used by congressional leaders last Friday, following a fiscal cliff meeting at the White House, suggested a willingess by both sides to work toward a real compromise, not just engage in political posturing and attacks on the opposite side.
That was enough to drive stock markets up Friday and again on Monday, when the Dow Jones industrial average closed 207 points higher than its opening mark.
New housing numbers showing 2012 is on track to match 2007 for sales of existing homes also helped boost markets Monday. But a number of stock market observers said investor optimism about a possible compromise on the fiscal cliff was a big reason for the latest rally, even if it stalled Tuesday.
There are still plenty of naysayers when it comes to a compromise. Some voices among the most liberal Democrats and the most conservative Republicans argue that it is to their parties’ political advantage to allow the nation’s economy to fall off the cliff, then blame the other side for any negative consequences.
We can only hope that the majority of members of Congress will ignore the extremes of both sides and support a plan to avoid going over the precipice.
As Federal Reserve Bank Chairman Ben Bernanke made clear again Tuesday, the economic consequences of the fiscal cliff are likely to push the nation once more into recession, just as the recovery is showing signs of strengthening.
It’s hard to imagine that President Barack Obama or leaders of either political party want to see another recession. We hope the optimists are correct and most members of Congress will put the economic health of this nation ahead of any narrow partisan interests.