How to Solve the Fiscal Cliff in 1 Easy Move
Introducing "The Obvious Bill"
Real talk: There ought to be no grand bargain deadline, because there ought to be no fiscal cliff, because there ought to be no debt ceiling. In some alternative universe where "ought to" is reality, Congress doesn't hold votes on its right to spend money; doesn't set economic time-bombs; and doesn't bring the country to the brink of recession every 18 months.
Back in this universe, Congress does have a debt limit, which lawmakers did use to build a fiscal fjord, which Washington is using now to force a grand bargain on the deficit before the New Year. The official media narrative, elegantly captured by Jon Chait, holds that Congress is hopelessly divided on everything, and the only way we'll move forward is through disaster or grand bargain.
But that's wrong. Congress is not hopelessly divided over everything, and there is a path forward that is neither disastrous nor grand bargainish. It requires one simple thing: That Democrats and Republicans vote on the parts of the "grand bargain" that they already agree with.
Democratic and Republican interests overlap in three key areas.
-- First, just about everybody wants to keep the Bush/Obama tax cuts where they are for income up to about $250,000.
-- Second, majorities in both parties want to avoid the sharp cuts to defense, Medicare reimbursements, and non-defense spending in 2013.
-- Third, lots of people want to keep talking about a grand bargain, whether it's to appear serious to donors, constituents, and the media, or because they really do care about our long-term finances.
So here's an obvious bill. Let's call it ... The Obvious Bill. It solves the fiscal cliff without creating another cliff simply by ... passing the parts of the grand bargain everybody wants to pass, already. The Obvious Bill would extend tax rates established by Bush and extended by Obama. It would delay cuts to the budget established by the Budget Control Act in 2013. It would also extend current policy on measures like the doc fix. That's it. The fiscal cliff shrinks by hundreds of billions of dollars immediately and lawmakers can keep working on a grand bargain if they like.
I can anticipate two, but by no means all, of the objections. (1) It's not a perfect solution to the fiscal cliff and (2) It destroys leverage on both sides, but especially for the Republicans.
Both valid criticisms. The Obvious Bill isn't the perfect bill. It doesn't leave us with a much more efficient tax code or the best projected 2013 growth. It's also a much worse deal that both sides are hoping for. Republicans want to exchange a tax hike for promises of spending cuts, especially to entitlements; Democrats want to raise taxes by hundreds of billions more over ten years and to extend stimulus.
But here's the thing about the Obvious Bill: There no rule that says it has to be the last budget bill of the season, or even of the month. It's simply the bill that turns the fiscal cliff into a fiscal molehill and gives both sides time to work on a second deal to cut spending and reform entitlements in exchange for more 2013 stimulus and/or higher taxes.
Republicans would be giving up quite a bit by allowing taxes to rise without getting spending cuts in return. But there are two reasons why they might just bite this bullet. The first is the debt ceiling, which still needs to be dealt with. Republicans and Democrats could still make a deal in 2013 where Republicans negotiate for spending cuts and entitlement reform in the future in exchange for a little stimulus and a permanently higher debt ceiling.
Second, taxes are going up no matter what. The question is: By how much? Letting the Bush tax cuts expire for the top rate (a) gives Obama significantly less revenue than he asked for in his opening deal and (b) means Republicans don't have to actually vote to raise taxes. The tax hike on income over $250K will simply happen when the Bush/Obama rate expire at the beginning of next year.
The Obvious Bill might not happen. In Washington, the obvious rarely does. But what if?
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