THE BLOG
11/21/2012 11:22 am ET | Updated Jan 21, 2013

Fiscal Cliff or Bunny Slope?

Superstorm Sandy was a disaster brought to us by Mother Nature. The fiscal cliff is being brought to us by human nature. Which will be worse? Time will tell.

What we can tell right now is that Sandy was unavoidable. The cliff, on the other hand, was and is completely avoidable. We should not go over it, fall off of it, or even slip at all while working our way down it.

If we do, the only reason will be the perversity and illogic of human nature. The only way the worst case scenario can occur is if we substitute magical and political thinking for rational analysis and collaborative problem-solving. Let's look at the facts in this instance.

If we don't act, we will go over the fiscal cliff after the end of the year due to the expiration of all of the Bush-era tax cuts and across the board spending cuts triggered by the sequestration process. Federal Reserve Chair Ben Bernanke is widely credited with coining the term "fiscal cliff." He "implored Congress" in his testimony before the Senate Banking Committee on July 17, 2012, to avoid it. The cliff is indeed real -- even if it is man-made -- but there are a number of reasons that we shouldn't even be approaching it and resolving this apparent crisis should be a no-brainer.

First, we have had a basis for a solution to the cliff since Dec. 3, 2010. That's the date that the members of the National Commission on Fiscal Responsibility and Reform (better known as the Simpson-Bowles Commission, named after its co-chairs Alan Simpson and Erskine Bowles) failed to pass the Commission's Report by a super majority. It needed 14 out of 18 votes. It got 11 and some bipartisan support.

It's not just the work of the Commission that can be employed in the cliff problem-solving. As Erskine Bowles pointed out in an article for the Washington Post the day after the national elections, "We already have the blueprints. It's the type of bi-partisan package toward which the commission I co-chaired..., the Domenici-Rivlin group, the Senate's 'Gang of Six', and the Obama-Boehner negotiations all worked."

Second, the Congressional Budget Office (CBO) has recently released a report highlighting the negative impact of "fiscal tightening in 2013." The CBO projects that GDP will drop by 0.5 in 2013 and that unemployment rate will rise to 9.1 percent. It goes on to state:

"Output would be greater and unemployment lower in the next few years if some or all of the fiscal tightening scheduled under current law -- sometimes called the fiscal cliff -- was removed. However, CBO expects that even if all of the fiscal tightening was eliminated the economy would remain below its potential and the unemployment rate would remain higher than usual for some time."

Continuing with policies that trigger this condition should be absolutely unacceptable. Our GDP growth is already anemic and unemployment has been too high for far too long. We need policies that stimulate rather than those that strangle.

Third, before the election, a group of CEOs from approximately 80 large companies such as Allstate, Deere, Walgreen, Caterpillar and Boeing signed a "manifesto" calling on Congress to reduce the federal deficit with tax increases as well as budget cuts. In their statement, they endorsed the Simpson-Bowles approach -- about $3 in spending cuts for every $1 of tax increases -- as an "effective framework."

This group was organized by the Campaign to Fix the Debt ("The Campaign"). On November 14, Jeff Immelt of General Electric, David Cote of Honeywell, and other backers of The Campaign met with President Obama at the White House to discuss the need to address the fiscal cliff. The Campaign has a $40 million dollar budget and will be running advertisements with slogans such as "Just Fix It" to heighten public awareness of the need to solve this problem now.

Fourth, while the average citizen may just be focusing on this issue, informed citizens have already proven that the people know best. In May of 2010, the Committee for a Responsible Federal Budget (CRFRB) put up an online "Stabilize the Debt" simulator. The simulator allowed individuals to make choices regarding what they would do drive down the debt.

In April of 2012, the CFRB reported that more than 250,000 people had used the simulator. Ninety-four percent of the respondents reduced the deficit through a combination of spending and revenue changes. The CFRB noted that "71 percent of Democrats supported raising the retirement age and 82 percent of Republicans supported letting at least some of the 2001/2003 and 2010 tax cuts expire."

Fifth, on the spending cuts or sequestration side, this is not an October surprise or an unexpected storm for the Congress. This is a men- and women-made catastrophe created by our legislators who kicked the can down the road on Aug. 2, 2011, when they passed the federal budget and established a Super Committee to make cuts of almost $1 trillion and called for automatic reductions if the Committee did not accomplish its task.

On Nov. 21, 2011, the Super Committee announced, "We have come to the conclusion today that it will not be possible to make any bipartisan agreement before the committee's deadline." From that point forward until the run-up to the presidential election in September of 2012, Congress paid virtually no attention and made no legitimate attempt to address the debt problem. It became a campaign talking point but not a policy pivot point.

So, there we have it. After much wasted time, the country and Congress is staring reality in the face and it is not pretty. It is now time, as Erskine Bowles put it in his Washington Post op-ed:

... for both sides to move beyond contentious electoral politics and come together in the spirit of good governance to replace the abrupt and mindless spending cuts and tax increases set to take effect Jan. 1 with a gradual and intelligent deficit reduction plan.

America's debt and deficit problem has been studied to death. Almost all of the information and plans introduced in 2011 and what little was done in 2012 were slight variations on old themes. There was no new knowledge being created or insights being gained.

There are a variety of viable options that can be used to construct a "gradual and intelligent deficit reduction plan" comprised of spending cuts and tax increases. Congress is at the juncture now where it has to do the right thing and that is not necessarily the right wing thing.

The Senate appears ready to collaborate in reaching a solution. Republican senators like Lindsey Graham (S.C.) and Bob Corker (Tenn.) have indicated a willingness to do so. Amy Klobuchar (D-Minn.) in a conversation on Morning Joe indicated that she thought a "grand bargain" was possible.

The House could be the stumbling block. Up to this point, conservative house members have been inalterably opposed to "new tax increases." That might have been a matter of principle. Or it could have been a matter of political expedience.

Most of the House members have signed Grover Norquist's "Taxpayer Protection Pledge." In a 60 Minutes interview with Steve Kroft on Nov. 20, 2011, Norquist said his organization, Americans for Tax Reform, would fund ads opposing any elected official who supports tax increases "to encourage them to go into another line of work like shoplifting or bank robbing, where they have to do their own stealing."

During that same interview, Mr. Norquist described his role as simply protecting the Republican brand in the same way that Coca Cola protects its brand integrity. The elections of 2012 are now behind us and it is time to call the question: Which takes precedence the Republican brand or the American brand -- country first or party first?

In his first interview after running unsuccessfully for vice president, Representative Paul Ryan (D-Wisc.) said, "In order to get things done, in order to reach common ground, both sides need to put out not just rhetoric, but specific ideas on the table." If one of those ideas addresses tax increases in a solid and substantive manner, that will put us more than half the way home to converting this so-called "fiscal cliff" into the bunny slope that it should have been all along.

Here's the deal: Only experts and extreme skiers can survive the cliff, but we can all make it down the slope. The choice should be simple: The many or the few. It is now in Congress' hands. We are cautiously optimistic they will choose wisely and act in a bipartisan manner. The country needs them to do so.


To get regular updates on what Ed, George and Frank are writing and reading, subscribe to their newsletter by going to the following link
: http://bit.ly/pivotsignup

Subscribe to the Politics email.
How will Trump’s administration impact you?