Barry Anderson: Don’t Delay Fencing Off the ‘Fiscal Cliff’
CRFB board member Barry Anderson, along with Steve Bell of the Bipartisan Policy Center and Joe Minarik of the Committee for Economic Development, write in today's The Hill that letting the country go off the cliff and cleaning up the mess later would create even more problems for Congress.
Both parties, they say, are hoping for a more favorable position in Congress and the Presidency next year. However, both parties also want to avoid the recession that fiscal cliff would trigger, with growth rates projected by the CBO to decline by 3.9 and 1.9 percent in the respective first two quarters of next year. The authors argue that policymakers may wait until next year to get something done and in the meantime turn to budget gimmicks to prevent the downturn.
This gamble assumes the use of two legal, but economically and socially dangerous, mechanisms to circumvent the automatic tax increases and spending cuts. Mechanism 1: Even though the 2001 and 2003 tax cuts will expire on Jan. 1, the Treasury Secretary can simply leave income tax withholding unchanged, preventing taxpayers from immediately feeling the effect of elevated rates. Mechanism 2: The president’s budget director can continue to supply government agencies with cash in the same amounts that they would have without the sequester, delaying the spending reductions until later in the year.
As the logic goes, if the incoming president and Congress can then change the law and undo the “fiscal cliff” in early 2013, the taxpayers and the federal agencies can just continue on that path laid out in January by the Treasury secretary and the budget director.
But consider how perilous this high-stakes gambit really is. Both Republicans and Democrats agreed to the sequester’s automatic spending cuts because they knew that the federal government must cut its deficit by at least — and really much more than — the amount of those reductions. Since then, however, the president and Congress have avoided any action that truly lowers the future accumulation of debt. They cannot now simply continue to kick this fiscal hand grenade down the road; they cannot postpone budget savings forever. Temporary budgetary gimmicks provide no solution; they just put off January’s pain by risking much greater pain later in the year.
Instead of each party waiting, lawmakers should be working on a bipartisan comprehensive solution now.
The full article from Barry Anderson, Steve Bell, and Joe Minarik can be found here.
"My Views" are works published by members of the Committee for a Responsible Federal Budget, but they do not necessarily reflect the views of all members of the committee.