Acting Quickly on the Cliff Is Not As Important As Doing It Right
An article today in POLITICO games out four possible scenarios for how the fiscal cliff could be resolved (or not). They discuss the benefits and drawbacks of each scenario for the budget and the economy. These scenarios are:
- Congress acts before the election.
- Congress acts in the lame duck session.
- Congress delays a solution until 2013 or enacts a partial fix
- Congress does not act
Clearly, acting sooner rather than later is better, all else equal. Acting sooner will provide certainty and allow people to plan for future changes in government policy. Of course, the speed at which lawmakers is only one dimension of how they deal with the cliff. Much more important is how they change the course of fiscal policy in the short- and longer-term.
As CBO has shown, acting quickly to put off the cliff without any offsets might work to avoid economic pain in the short term, but it will do no good for the longer-term economy. Congress should get started on a plan to get around the cliff, but most importantly they should get a deal that leaves our debt on a sustainable path.