ONLY A MONTH ago, there seemed to be ample reason for optimism. November’s election results appeared to break the fiscal logjam in Washington, with policymakers buzzing about a big, balanced budget deal. Robust spending on Black Friday portended a healthy holiday season for retailers, indicating, perhaps, that worries about the nation’s looming “fiscal cliff” would not sap consumer confidence. Now, with only a handful of days until more than $500 billion in tax hikes and spending cuts begin to kick in, Democrats and Republicans are again at loggerheads — and the country faces a harmful and gratuitous economic shock that would be inflicted by its own leaders.
There is plenty of blame to go around. A look at the numbers shows that President Obama and House Speaker John A. Boehner (R-Ohio) were tantalizingly close to a $2 trillion deal last week, disagreeing on only about $450 billion of the total package. Striking a bargain of that size would have been a good start toward a broader budget consolidation. But negotiations faltered along depressingly familiar lines. Mr. Boehner gave some on tax rates but still proposed to increase them only on household income of more than $1 million. Mr. Obama budged on entitlement spending but not enough. Trust didn’t materialize; flush with victory, the president at one point even told the speaker that he would get “nothing” in return for his early offer of $800 billion in new revenue, according to an account in the Wall Street Journal.
With time running short, the most Congress seems capable of passing before Jan. 1 is a stopgap deal avoiding the disaster that would come from doing nothing. Any bill must be based on an extension of the Bush tax cuts for households with income of less than $250,000, but lawmakers should not forget to deal with the fiscal cliff’s massive and inappropriate spending cuts, as well as annual headaches such as patching the alternative minimum tax.
Senate Majority Leader Harry M. Reid (D-Nev.) suggested Thursday that lawmakers might not be able to manage even that, and, predictably, politicians spent the day attempting to blame each other for the continuing impasse. Mr. Boehner insisted that Senate Democrats take up an unwise plan the House passed months ago, which would extend the Bush tax cuts even for the rich. Mr. Reid responded by calling the House a “dictatorship,” suggesting that Mr. Boehner was trying only to protect his position as speaker.
With such pettiness and ill will from congressional leaders, it will be little wonder if there is no deal. But avoiding the cliff, even with a stopgap, is imperative. Though many of the worst impacts can be put off for a bit, any government project with a lead time, including those at the Pentagon, would immediately be at risk, and federal contracting and tax collection could become a shambles.
Economists have warned of eventual recession, and Fitch Ratings and Moody’s Investors Service of U.S. credit downgrades. The mere specter of this government-induced economic catastrophe would undoubtedly deal great damage to the stock market and consumer confidence, both of which have already begun to slide.
Mr. Obama and Congress have four days left to fashion a deal. A failure to do so would be a complete abdication of their responsibility to the nation. It’s time for them to stop calling names and shifting blame and to start working with each other in earnest.