THE UNITED STATES is only three days away from going over the “fiscal cliff” — with all the damage that could do to confidence in the country’s capacity to manage its basic affairs — and Washington’s leaders still have not agreed on even a stopgap measure to avoid the worst consequences of not reaching agreement. But there is a clear way to avert them.
Congressional leaders and President Obama conferred at the White House on Friday afternoon, the first such meeting in six weeks. Instead of offering something new, however, Mr. Obama reportedly reiterated his position that the Bush tax cuts on household income above $250,000 should lapse on Jan. 1. Republicans wanted more from the president. But after the meeting, Senate Majority Leader Harry M. Reid (D-Nev.) and his GOP counterpart, Sen. Mitch McConnell (Ky.), said that they had agreed to attempt to hash out a deal over the weekend that enough Republicans can accept.
The task these leaders face is no longer crafting a big restructuring of federal taxing and spending. There isn’t enough time for that between now and the end of the year. The goal now, then, is the “bare minimum,” as Mr. Obama said Friday evening — merely to stave off a self-inflicted economic shock. It’s clear what such a stopgap must include.
The first element is a rise in income tax rates for wealthy Americans. The sting to Republicans might be lessened by an agreement on the estate tax, which is also scheduled to jump Tuesday.
But all the focus on tax rates leaves out much else that Congress must address. Lawmakers have essential housekeeping that they must see to before the end of the year, such as preventing a huge cut in Medicare payments to doctors and extending unemployment insurance. The alternative minimum tax (AMT), a scheme intended to ensure that the rich pay income tax, must also be patched. Unless Congress acts to stop it, the AMT will dig deep into the middle class. Delaying a patch until after Jan. 1 could wreak havoc on federal tax collection, affecting perhaps 100 million 2012 tax returns, according to the Internal Revenue Service.
Congress must also deal with the “sequester,” about $100 billion in ill-targeted and unwise spending cuts, including to the Pentagon, that will phase in beginning in January. Though destructive measures such as furloughs and layoffs could be put off for a time, if the cuts were allowed to kick in, they would still have immediate bite. Republicans might resist canceling or delaying the sequester without offsetting spending cuts elsewhere. But preventing the across-the-board reductions is nevertheless critical.
It is pathetic that political leaders have not already agreed to avoid the worst effects of the fiscal cliff. But, with Mr. McConnell and Mr. Reid talking, with the House returning this weekend and with House Speaker John A. Boehner (R-Ohio) promising that his chamber will consider any bill the Senate sends it, there is still time. Mr. Obama said that if there is no agreement, he would demand an up-or-down vote on his own proposal by both houses. That should be a last resort; better for Democrats to seek a bipartisan deal.