It’s hard to believe that in Wednesday’s presidential debate, most of which focused on the domestic economy, neither candidate even mentioned the “fiscal cliff” the Congressional Budget Office has predicted the country will fall off if the debt ceiling isn’t raised and a slew of tax cuts aren’t renewed before the end of the year.
Sure, there was plenty of high-minded talk about deficit spending and tax cuts, but no one addressed this especially timely issue, which members of Congress will presumably be too busy to deal with before Election Day. That will leave less than two months for the lame-duck Congress to do it afterward — otherwise, according to the nonpartisan CBO, the economy faces a certain recession.
Given the way lawmakers punted on the debt crisis last year — leading to a first-ever downgrade of the government’s credit rating and a huge decline in stock prices — and ever-increasing rancor between the two parties, there’s little room for optimism. And not only are there tax issues to resolve, but budget cuts: $1.2 trillion worth must be found or they will be made automatically (so-called sequestration, with roughly half the cuts coming from defense).
The stakes are huge. According to a report released last week by the independent Tax Policy Center, a typical middle-income family making $40,000 to $64,000 a year would get stuck with an additional $2,000 bill if the host of tax cuts set to expire at year’s end don’t get renewed. Most were enacted at the beginning of George W. Bush’s presidency, affecting wage and investment income, most significantly of high-income Americans; but there’s also the 2 percentage-point payroll tax cut passed at President Obama’s urging that benefits all working Americans.
Then there’s the specter of $1.2 trillion in spending cuts — too large an amount to cut without damaging the economy.
As it was for the last four years, the big logjam remains whether to effectively raise incomes taxes on the wealthy — families with earnings in excess of $250,000 — to where they were during Bill Clinton’s presidency. Obama and his fellow Democrats want to, while Romney and the Republicans don’t.
Romney and Obama talked about the issue Wednesday, but not in reference to the impending “Taxmageddon” deadline. They need to clarify their positions, and one can only hope that they — and their respective parties’ congressional delegations — will agree to respect the outcome of the election during the lame-duck session: If Obama wins, the Republicans go along with renewing all the tax cuts except those for the rich; if Romney wins, the Democrats defer to him on all the tax cuts.
This should have happened after the 2008 election, since it was a big issue in that campaign, Obama’s position on it was clear, and it was, in part, what got him elected.
Congress can, and often does, do as it pleases, and maybe will again this time. But with the stakes so high, voters might do well to remind their representatives between now and Election Day that they don’t want another stalemate to derail the tax and debt ceiling issues, and send the economy over a cliff.