Tax policy is also causing heartburn. Kate Barton of Ernst & Young said she is advising clients not to count on the renewal of a slew of popular business tax breaks that expired in December. Even incentives for research and development, which are revered in both parties, could get caught in the year-end logjam.
“We’re not trying to be alarmist. But it’s a time when the telescope and the crystal ball are really foggy,” Barton said. “You talk to one person and you hear one thing; you talk to another and you hear something else.”
This month, about 120 university lobbyists gathered near Metro Center in hopes that top aides to Reid and Boehner would shed light on the fiscal end game. They didn’t. Instead, Reid’s deputy chief of staff for policy, Bill Dauster, cited a “good, if dour,” independent analysis that “many election outcomes would produce dynamics not conducive to getting a deal” at all before the new Congress takes office in January.
“You just don’t get the sense that there’s even a secret plan yet. It’s scary,” said Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget, who has been meeting with corporate leaders in an effort to build support for a comprehensive deficit-reduction plan.
During a recent dinner in Washington, Lawrence H. Summers and Robert Rubin mulled the situation. Both men led the Treasury Department during the Clinton administration, and Summers was Obama’s top economic adviser in 2009 and 2010. They concluded that, whatever happens on Election Day, exhausted lawmakers are likely to resort to a short-term deal that extends all the tax cuts, postpones the spending cuts and pushes the deadline for fiscal calamity into the spring of 2013.
But even that move would be risky, Rubin argued, potentially inviting another downgrade of the U.S. credit rating, roiling financial markets and shattering confidence that the United States will ever get its debt problem under control.
Solutions are easy to come by “when you’re sitting at the Council on Foreign Relations in New York,” said Rubin, the council’s co-chairman. “It’s a lot harder to do it when you’re sitting in Washington and it’s one minute of midnight.”