Back before the election, Angus King — then a candidate for the Maine Senate seat being vacated by Olympia Snowe — explained one of his ideas for dealing with the Bush tax cuts: “We should consider pegging the sunset of these tax cuts to something non-arbitrary, like a certain amount of GDP growth, or a lower level of unemployment.”
He’s right. Given our sluggish recovery, now is not the time for deficit reduction. Far from forcing responsibility now, the country would be best served by a Congress that kicked the fiscal can down the road, and focused attention on putting people back to work (preferably by taking advantage of low, low interest rates).
Thankfully, there’s still time for this to happen. As the New York Times reported this morning, the White House is at an impasse with House Republicans, who have attacked President Obama’s fiscal cliff proposal as “unserious,” even as they refuse to detail their own plan for spending cuts and revenue increases. “We’ve put a serious offer on the table by putting revenues out there to try to get this question resolved…but the White House has responded with virtually nothing,” said House Speaker John Boehner, omitting the fact that neither he nor his allies have offered specifics on revenue or spending.
Rather than try to find a path around this impasse — and in the process, pass a debt reduction bill that will put the United States on the path toward unnecessary (if more moderate) austerity — the Obama and House Republicans should agree to postpone the fiscal cliff until the economy has improved. More specifically, they should peg the Bush tax cuts, the payroll tax cuts, and the unemployment insurance extension to improved economic conditions, as measured by the joblessness rate. Rather than the arbitrary trigger of January 1st, 2013, the United States would not go over the fiscal cliff until it was economically ready to do so. At that point, Congress and the White House can haggle over the right level of spending and taxation.
The obvious objection is that Washington should be “responsible” and look for a long-term deal to get our fiscal house in order. But that’s nonsense. Not only is it impossible to constrain future legislators, but it’s impossible to know the economic situation of even ten years from now, much less thirty years hence. The fiscal decisions of the future will be shaped by unforeseen events — wars, technological breakthroughs, environmental changes — and not the negotiations of today.
Right now, the actual problem faced by the United States is weak demand, leading to high unemployment and slow growth. Deficit reduction can’t fix this. Thankfully, inflation is low and financial markets are willing to lend at historically low interest rates. If Washington actually wants to be responsible, it will postpone the fiscal cliff — a problem of its own making — ignore calls for fixing the debt, and focus on the millions of Americans who still struggle to find work.