Tuesday, Nov. 13, 2012 | 2 a.m.
"Petraeus-gate" may have gripped Washington’s attention for the long weekend, but it’s back to business today as Congress regroups to rehash the business it didn’t manage to finish during the past two years.
Lawmakers have a habit of turning lame duck sessions, the period between the election and the start of the next Congress in early January, into high-stress marathons, especially during election years. Midnight sessions, working weekends and sky-is-falling sentiments are common.
Oftentimes, it happens because lame ducks are the last chance for current congressional leaders to effect legislation before they’re sidelined by a change in power.
But this year, the election left the balance of power unchanged, meaning there’s little hanging over lawmakers’ heads in the way of a political deadline.
Unless you count, oh, bearing the brunt of blame for the country’s fiscal destruction if the two sides fail to hop to it.
Congress has a number of items left to complete on its agenda, including a bill to save the Postal Service, a farm subsidy bill and maybe, just maybe, a bill to regulate online poker.
But none ranks so importantly as the onus on Congress to do something to steer the country away from the edge of a second recession, a brink now commonly known as the “fiscal cliff.”
The fiscal cliff is one part taxes, one part budget cuts. Dec. 31 is when the tax rate cuts that were put in place in the early years of President George W. Bush’s administration, and extended again in 2010, expire. It also is when a 2 percent payroll tax cut is set to expire.
Should Congress reach that expiration date without striking a deal to keep certain tax cuts in place, taxpayers at almost every income level will see their tax rates rise by 5 to 7 percentage points — 2 points of that being due to the expiration of the payroll tax cuts, which are not expected to be extended.
That alone has been enough to cause Congress serious consternation in the past. But at the same time, the government is bracing for an across-the-board cut to federal spending, thanks to a mechanism known as “sequestration.” The sequestration chop was designed by congressional leaders last summer as an incentive to lawmakers on a special “super committee” to cooperate and figure out a way to bring down the deficit. They couldn’t. So the cuts are coming.
The combined force of the fiscal punch is estimated to be about $600 billion, or almost 4 percent of the national income — not something a country just coming out of recession is in good shape to sustain without incident.
But there is some dispute as to whether the fiscal cliff will be as catastrophic as it sounds. Many economists maintain that it will be more like a fiscal sloping and won’t be all that sudden.
Signs from lawmakers don’t suggest they are approaching the deadlines with any new urgency. In the days after the election, congressional leaders appeared to retreat to their familiar corners, with House Speaker John Boehner, the country’s top Republican, speaking against raising tax rates. Meanwhile, re-elected President Barack Obama said Friday that he would not accept a deal that didn’t allow tax rates on incomes over $250,000 to rise.
But if the lawmakers are unable to bridge the familiar crevasse between budget cuts and tax rates for the sake of avoiding the fiscal cliff, there is a fail-safe incentive: Right around the time all of these financial forces are expected to strike, the country is expected to run into the debt ceiling.
Yes, the pesky debt limit that almost pitched the country into chaos last summer and did result in at least the partial, marginal lowering of the United States’ credit rating is back, rearing its head. Ironically, last summer’s debt ceiling deal is where this whole fiscal cliff mess started: Congressional action is required to raise the debt limit, but because lawmakers — particularly Republicans — would not agree to raise the limit without some trade-off, the parties struck the deal on cuts that have turned into one-half of the burdensome fiscal cliff scenario.
If the country does hit the fiscal cliff this time, the incline of the drop-off versus slope won’t be the urgent question. It will be whether the federal government should cover its foreign debts or its obligations to veterans. Whether it should keep up with its Medicare and Social Security bills or simply stop issuing paychecks to soldiers serving in Afghanistan.
The threat of such a financial impasse is what ultimately drove lawmakers last summer to put aside their differences and pass compromise legislation that put the fiscal cliff in motion. Now, as the fiscal cliff is about to take effect, it may prove to be what brings them to the table again to strike a more final compromise before the end of 2012.