Once upon a time, in a momentary glimmer of self-awareness, Republicans and Democrats in Washington decided the only way they could tackle a debt crisis was by threatening themselves and the country with economic disaster. It was the summer of 2011, and lawmakers and the White House vowed to come up with a debt plan by New Years Day 2013 or inflict extraordinary cuts on government budgets. The prospect of those sequester cuts, when combined with a series of tax increases scheduled for the same date, would theoretically provide everyone enough incentive to do what everyone knew they should be doing all along.
It didnt work.
The fiscal cliff deal struck by the Senate and House this week with a late assist from Vice President Joe Biden did little if anything to tame the debt or the factors that contribute to it. It didnt overhaul the individual tax code or begin reform that would revamp and repair Medicare and Social Security. It didnt even eliminate sequester cuts, instead putting them off for two months.
In fact, there was little in the way of spending cuts at all. But Republicans complaining about that now are conveniently forgetting that just weeks ago, they walked away from promised spending cuts and a slowing of Social Security cost-of-living increases, all because they couldnt stomach what they ended up settling for anyway, which is taxes rising on the wealthy.
The deal did take a small step in the right direction with $600 billion in new revenue, and it dodged the economic blow that wouldve come from tax cuts expiring for most Americans, the middle class being hit with an additional bill from the alternative minimum tax, and unemployment benefits ending for millions.
In the end, President Obama also got most of the tax hikes on the wealthy hes been promising since he was Candidate Obama in 2008. Those hikes are part of a balanced approach the president has advocated, including social spending cuts and reform, and he offered $930 billion in unspecified cuts while negotiating with House Speaker John Boehner last month. But Obama seemed to move the goal posts a bit this week, hinting that cuts would have to be met with an equal amount of new revenue from taxes.
Some Democrats are resisting the prospect of any social spending cuts, and theyre wrongly claiming that Medicare and Social Security are just fine as is. Republicans, and Americans, should hold Obama to his promise, and theyll have the opportunity to do so in two months when Congress reaches the debt ceiling.
Thats one more thing this weeks deal didnt do raise the debt ceiling so that the country can pay its bills and avoid a devastating default. Another cliff is coming, and although Obama rightly points out that debt negotiations and the debt-ceiling debate are two separate discussions, the timing of sequester cuts with the impending default means theyll likely be linked.
When that happens, Obama should continue down the balanced debt reduction path he traveled last month. Republicans, no longer yoked to resisting tax rate increases for the rich, should pursue the tax reform some in the GOP floated in previous negotiations.
To do otherwise would result in short-term calamity if the country is allowed to go into default and long-term catastrophe if the countrys debt continues to soar. Either should be enough to bring lawmakers together, but as we know by now, thats just another Washington fairy tale.