There are two constants when watching Congress deal with any looming crisis. First, substantive action to avert said crisis is always preceded by posturing, finger pointing and serious rounds of the blame game. Second, nothing inspires final congressional action more than an absolute deadline to avoid disaster. Unfortunately, Congress inevitably runs out the last seconds on the clock before it magically comes up with the “fix.”
We’ve just finished Act One of the fiscal cliff drama. Will the eventual lame duck fiscal cliff fix be the “grand bargain” the President talks about? Will it include some form of farm program extension or rewrite? My guess is any package hitting the President’s desk before January 1, 2013, will be a short-term fiscal fix – carrying at the very least some form of modified Farm Bill extension – but it won’t be the end game.
The President is racking up miles on Air Force One hoping his communications skills inspire the American people to “put pressure” on Congress to buy his proposed fix on the looming fiscal cliff, and the White House gets points this week for the audacity in its plan as delivered to the Hill by Treasury Secretary Tim Geithner. House Speaker John Boehner (R, OH) and Senate Minority Leader Mitch McConnell (R, KY) – who reportedly laughed out loud as Geithner detailed the plan – rejected the Obama approach outright because the President’s path to cutting $4 trillion from the deficit over the next decade does not include action on entitlement programs, and is built on $1.6 trillion in new tax revenues generated over the next decade by increasing rates on the top 2% of U.S. wage earners – those making over $250,000 a year. Also in the White House plan are tax increases on capital gains and dividend income, $600 billion in new taxes, more “stimulus” spending — $50 billion for “infrastructure” in 2013 – and a return to 2009 estate tax rates. Just for grins, the White House threw in new authority to the President to raise the nation’s debt limit without congressional approval.
This led to the inevitable schoolyard taunts by Sen. Chuck Schumer (D, NY) et al, basically chanting, “We’ve showed you ours, now you show us yours.” There’s some truth in Schumer’s demand, but he knows the GOP won’t reveal its plan until Republicans have milked every political point they can from the kabuki theater of fiscal cliff negotiations.
Just as the President’s plan is his well-known wish list, the Republican counteroffer will hold few surprises. It will be long on program spending cuts, will include revenues through tax loophole elimination and will tinker with entitlement programs, including Medicare, Medicaid and Social Security. It won’t raise taxes on anyone, but will magically – through the same creative accounting used by the Administration – come up with $4 trillion in cuts. Everyone will then praise the plan as enlightened and progressive or condemn it as anti-middle class, anti-elderly, etc. Then the real negotiating begins.
What will emerge between now and New Year’s Day is a deal that in the near term won’t achieve much more than tinkering with existing tax rates. There isn’t enough time or political will to do the heavy lifting. We’ll see a deficit reduction “down payment” and the “framework” for the rest of the job some on Capitol Hill talk about. There will be a six to nine-month extension of the Bush era tax rates with maybe some minor tinkering, and the rest will be pledges to act by dates certain on tax reform, deficit reduction, entitlements, revenues and so forth next year. Everyone will then proudly point to the bipartisanship so difficult to achieve, so necessary to avoiding the known outcome of a swan dive off the fiscal cliff, all of it to protect the American people.
That deficit “down payment” is where we see a “modified” extension of farm programs, with a much-ballyhooed “income safety net.” I’ve said this before: The ultimate 2012 farm program product – notice I didn’t say “final” Farm Bill product – will be a hybrid of the Senate-passed bill, the House committee-approved bill – because of the savings that can be moved to the spending/deficit reduction side of the federal ledger – the House-passed disaster bill and a passel of tweaking necessary to avoid reverting to 1949 “permanent” ag law that will force us to pay $7 a gallon for milk.
Think of these fiscal cliff shenanigans like any Christmas. You make up your list of perfect gifts and you share it with everyone. Unfailingly, you wind up with what folks think you need or want. In this case, Congress is the gift giver.