What is the Fiscal Cliff and What Needs to Happen to Avoid An Economic Disaster?


President Barack Obama has taken the political offensive in the last half of 2011, believing that he has a mandate significant enough to trump conservatives in Congress in the fiscal cliff debate. In effect, the president is attempting to bully legislators into a dumb deal, in which Republicans give up their ability to obstruct bad legislation relating to the country’s fiscal issues. However, Democrats are not in a control position. So, there is no reason to allow the president to take the country down any ill-advised paths. Moreover, conservatives should call Obama’s bluff and insist on a deal that is palatable for those on both sides of the aisle.

One would think that Obama would be kinder and gentler after his victory; he should be a good winner and reach out to the other side ... bi-partisanship is what we need during these trying times. By doing so, he could have charmed his adversaries into a fiscal solution that would be good for America and all Americans. The reality is he still faces filibusters in the Senate and a Republican-controlled House should he decide to go it alone. What is wrong with our non-negotiator-in-chief? Has he any deal making skills at all? The president has nothing to hang his hat on. If Republicans dig in their heels, they can, and probably should, force us off the fiscal cliff. I really don’t think the president recognizes this reality.

Here are some relevant facts:

The fiscal cliff is just over one month away (January 1, 2013 deadline). Congress must agree to a new deal or all taxpayers will pay higher rates and the country will experience draconian spending cuts possibly drawing us into another recession. Republicans have the power to quash any new legislation in either house. That means that Democrats cannot ram through a fiscal cliff remedy without the support of the opposition. Repeat, some number of conservatives must be a party to any solution. For months, Democrats have insisted that tax increases for the wealthy must be part of a solution, and both parties have agreed spending cuts are essential, albeit the magnitude of the latter must still be negotiated. Yet, Obama has put spending cuts on the back burner and continues to campaign for higher tax concessions from the rich. Why would the president focus only on part of the equation? Seems like some members of his own party are already starting to question his tactics and lack of negotiation acumen. Unless Republicans negotiate a deal that includes entitlement reform, it will not happen while Obama is president. Therefore, Social Security, Medicare, and Medicaid must be part of the solution now, as together they have the potential of bankrupting America. And, don’t believe the rhetoric about Social Security. It is not a negative factor in our budget yet, but will be in the near future. How can a spending cut negotiation not include Medicare and Medicaid? They comprise 21% ($769 billion) of the budget and are expect to increase at a torrid pace into the future. Any short-term fix that Republicans agree to will emasculate their power, unless they retain the right to object to an increase in the debt ceiling, or receive promises to cut spending written in stone. As an example, agreeing to extend the tax rates for earners of less than $250,000, and allowing rates to increase for earners over $250,000 would be an idiotic provision to accept in a vacuum. Ironically, Republicans have opened the door to a compromise by indicating that they would be receptive to tax increases and/or decreased tax benefits for the wealthy. Why hasn’t Obama responded with any concessions? When does the compromise begin for this president?

Conservatives need to take Obama down a few notches. He is not as strong as he thinks he is. They should call his bluff relating to the fiscal cliff. Incidentally, the cliff will not destroy our economy if it is rectified a short time after the end of the year. I say force the president and his sidekicks in Congress to deal with the problems of exploding debt right now. Winning a small class warfare battle by increasing the rates of the affluent by two or three percentage points is small potatoes. Our country continues to spend way beyond its means, and America will be weaker as time passes if the situation is not rectified.