I haven’t blogged much lately, in fact, very little since the November 6 elections. I needed a break, and I hope you haven’t missed me too much. In any case, I am back with the goal of writing more about issues beyond politics and the political quagmire here in Washington.
My blog posting yesterday about the death of jazz legend, Dave Brubeck, was part of that effort, and I hope to continue so. But, first, I must write about the “financial cliff” – the financial Armageddon that looms at the end of the year if the White House and Congress cannot agree on a new approach on how to solve America’s serious financial problems and growing national debt.
It’s already a month since President Barack Obama’s convincing victory over the Republican challenger Mitt Romney. The Republicans are still trying to come to terms with what actually happened and why. Meanwhile, all eyes in Washington have been focused on the “fiscal cliff,” by some called the “austerity crisis,” a matter of seldom seen proportions and seldom seen consequences if not dealt with before the New Year. If the White House and Congress cannot come to an agreement, a series of automatic events – all extremely negative — will unfold, both on taxes and on budget cuts.
The financial cliff came about because of previous failures in Washington after the big debt ceiling crisis of 2011 to lower the budget deficit and the national debt. The parties decided to postpone the tough decisions – kick the can down the road, as it is so often put. So, no one imposed the cliff on Washington – the politicians did it this to themselves, and they will go down together if there is no deal before December 31, although polls show that most voters will blame the Republicans.
If there is no deal, all American will see their taxes go up next year — by an average of 3 446 dollars. In addition, 200 billion dollars in tough spending cuts will take effect. A non-deal will cause the U.S. economy to shrink and unemployment to turn upwards, to over 9 percent. That would be not only a shame, it would be catastrophic for an economy that now shows encouraging signs of steady improvement, including steadily lower unemployment figures – to now 7.7 percent, the lowest since December 2008, just before Obama entered the White House.
Indeed, it’s a frightening scenario, and, for many, it seems incomprehensible that the White House and Congress will let this happen. Too much is at stake, both politically for the parties, and economically for the whole country. No one wants to be blamed for such a collapse and common sense says that there will be a deal. But time is rapidly running out in this “magic moment,” for a deal, as a leading Democrat put it recently. There is no better time than right now to make a deal.
So far, the Republicans have resisted the “balanced approach” — with tax rate hikes for the richest two percent of the population, those with incomes of over 250,000 dollars per year, combined with a series of spending cuts – an approach on which Obama campaigned and won the election. Stubbornly, the Republicans have so far said no to all tax rate hikes, but without them, Obama has repeatedly and firmly stated, there will be no deal.
During the election campaign, the majority of voters seemed to think that Obama’s “balanced approach” was sensible, and those sentiments linger. The President’s approval ratings are up, over 50 percent, and he is now clearly in the driver’s seat.
Maybe, in the end, plain fear of a failure and the subsequent wrath of the voters, who want a deal and want Washington to come together, will drive the parties together to reach an agreement. There have been cracks in the unified resistance among the Republicans in Congress to higher taxes. No doubt they see the writing on the wall.
If the Republicans don’t meet Obama partway, they “would contribute to a recession that would discredit them for a decade,” David Brooks warns in the New York Times today.
Fear… fine! Who cares? The main thing is that there is a deal before midnight strikes on December 31.
What about Krugman’s point of view??
Catherine Wyler Wyler / Rymland Prods. Inc. 202.333.6121 firstname.lastname@example.org
You mean his latest column in the NYT saying that it is not a fiscal crisis, it is a job crisis? I’d say it’s both and I hope to do another blog about this soon.