The outline of a fiscal cliff deal is coming into view in the Senate: A bipartisan group is considering a three-step plan that would approve a framework for an overhaul of the tax code, entitlements and other spending. It would be attached to a Bowles-Simpson-like trigger if Congress can’t work out the details of the framework and an initial “downpayment” to help put off the sequester, as Jonathan Weisman reports.
But even among budget experts who agree that this could be a sensible way to proceed—a combination of short-term cuts with big picture, long-term deficit reduction—there’s sharp disagreement about how long legislators really have to come up with a deal.
The “fiscal cliff hawks” are issuing dire warnings to Congress about the consequences of missing the Dec. 31 deadline, urging legislators to put a process in place to get a bargain hammered out as quickly as possible. “It would be very bad policy to just go over the cliff. Some people think it makes it easier, but I think makes the U.S. look foolish, and it takes a risk with the macroeconomy, adding to the uncertainty,” says Alice Rivlin, former director of the Congressional Budget Office and co-author of the Rivlin-Domenici deficit reduction plan.
This view argues that as Dec. 31 approaches, however far apart the two parties may be on a deal, legislators must come to some kind of agreement to avoid harming the economy at large.
By contrast, “fiscal cliff doves” believe that the purportedly dire consequences of going over the cliff on Jan. 1 are overblown. They believe there’s an urgent need to come to a deal, but stress that most of the tax and spending changes will be phased in gradually over 2013. So in their view, it’s not worth agreeing to a deal at any cost as the deadline approaches.
The doves include the Center for Budget and Policy Priorities, Brookings’ William Gale, and Bruce Barlett: They all think that an alternative to sequestration and a better long-term deficit plan are necessary, but maintain that avoiding the cliff on Dec. 31 won’t be worth it if Republicans won’t agree to enough revenue increases. In fact, both Gale and Barlett believe that Congress will be in a better position to come up with a balanced deal if we go over the cliff, as Congress would be voting to lower tax hikes that were enacted automatically.
“[G]iven the propensity of Republicans in the Senate to filibuster anything they don’t like, no matter how trivial, and the fact that virtually all have signed a ‘taxpayer protection pledge’…the likelihood of compromise without severe external pressure is unlikely,” Barlett writes. “A better idea, in my opinion, is to let the fiscal cliff occur as scheduled and enact a fix retroactively, as soon as possible,”
For now, fiscal cliff hawks and doves are on the same page, hoping Congress can come up with a reasonable alternative before the deadline. But both camps are already pushing legislators to accept their own timeline for fiscal doomsday.