Washington — In the controversy surrounding the
"fiscal cliff" issue, it's easy to forget that the origin of the entire
debate was a professed desire to reduce swollen federal deficits.
Whether the target was $4 trillion over 10 years, as proposed by the
Bowles-Simpson deficit reduction commission, or in the $2 trillion
range, as tossed around by House of Representatives Speaker John Boehner
and President Barack Obama, the idea was to rein in total debt that now
tops $16 trillion.
By those standards, the bill
passed by Congress Tuesday to avoid the cliff's automatic steep tax
hikes and across-the-board spending cuts, looks paltry indeed.
The legislation, which won final approval in the House late Tuesday
after passing the Senate early in the day, adds nearly $4 trillion to
federal deficits over a decade compared to the debt reduction envisioned
in the extreme scenario of the cliff, according to the non-partisan
Congressional Budget Office.
This is largely
because it extends low income tax rates for nearly every American except
the relative handful above the $400,000 threshold.
It's also because it put off for at least two months the automatic
budget cuts that were part of the cliff and would have saved about $109
billion in federal spending on defense and non-defense programs alike.
The legislation, which ultimately came down to a fight about tax equity
rather than federal spending, did to deficit reduction what Obama and
congressional leaders always promise to resist: It "kicked the can down
the road" to a later date.
In explaining the
measure to the news media, the White House, which helped broker it, gave
no particular figure for how much it would bring down the deficit,
stating only that, somehow, "with a strengthening economy," it would.
Whether it ultimately succeeds will depend in part on what happens to
the now-delayed "automatic" spending cuts, including whether Obama
follows through on reductions in outlays.
Full circle
The legislation also sets up what is likely to be an even more heated
fight in late February when the Treasury Department must come to
Congress to seek an increase in the government's borrowing limit.
That will bring everything full circle to where the cliff originated
during a struggle between Obama and Republicans over raising the federal
debt ceiling above $14.5 trillion.
That
struggle ended in August, 2011 with a bipartisan deal designed to scare
Congress into legislating significant long-term cuts in federal
spending.
The idea was that by setting a strict
deadline of Jan. 2, 2013 and dire consequences in the form of draconian
spending cuts for failing to meet it, the White House and Congress would
be forced into action.
Republican
Representative Paul Ryan, a self-described deficit hawk who served as
the Republican vice-presidential candidate, declared the moment a "huge
cultural change."
Coincidentally, low tax rates
that originated during the administration of President George W. Bush
were also set to expire on Dec. 31, making the prospect of inaction so
threatening that the Congressional Budget Office determined that failure
to intervene could cause a new recession.
But
the controversy over taxes, coming on the heels of a presidential
campaign built around Obama's demand for middle-class tax justice,
ultimately consumed the argument over the cliff, leaving deficit
reduction as the forgotten issue.
Among those
disappointed by the process was Alice Rivlin, a Brookings Institution
scholar, former US budget director and co-author of another widely
discussed deficit reduction plan named for herself and former US Senator
Pete Domenici, a Republican from New Mexico.
"I'd been optimistic," Rivlin said in an interview with Reuters. "I
thought that we might get it done" and that Boehner and Obama "might get
to a grand bargain."
Maya MacGuineas, a budget
hawk who has led a group of corporate chieftains in a group called "Fix
the Debt," was also unenthusiastic about the bill.
"This is one of the lowest common denominator deals," MacGuineas said.
"I wish I had something nice to say, but not so much." — Reuters
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