Jump! Run for your lives! We're about to go over the fiscal cliff!
That just about sums up the message coming out of Washington these days. Is there reason to panic? Not really, because brinkmanship has become an essential part of the political process. It's the answer to gridlock.
American government is set up to fail. The Founders created a complex and ungainly system with two houses of Congress, three branches of government and competing centers of power in the federal government and the states. The idea was to limit power. The result is a constitutional system that works exactly as intended. Which is to say, it doesn't work very well at all. As president after president has discovered, there are many ways opponents can stop measures from getting passed, even if the president's party holds a majority in Congress.
The wonder is that it actually does work. It works when there is a crisis -- when an overwhelming sense of urgency overwhelms blockages and lubricates the system. Barriers fall away and things get done, sometimes with amazing speed and efficiency.
Rahm Emanuel was right when he said in 2008, just before President Obama took office in the midst of a financial disaster, "You never want a serious crisis to go to waste." Politicians know that, which is why they are always hyping issues. They try to declare a drug crisis or an education crisis or an environmental crisis. Or they try to rally the country to fight a "war" on something -- a war on crime, a war on drugs, a war on poverty, a war on terror.
Hence the fiscal cliff. Sen. Olympia Snowe calls it an "artificially created crisis." She's exactly right. It was deliberately created by Congress last year to force action on debt-reduction. It came out of another artificial crisis last summer -- the showdown over raising the nation's debt ceiling. Congressional Republicans demanded huge domestic spending cuts. Democrats insisted on a balanced deal including military cuts and tax hikes for the rich. The predictable result? Gridlock. The solution? Create a supercommittee to figure out a deal.
The whole idea behind the supercommittee was to force a compromise. If a majority on the supercommittee refused to endorse a plan, or if Congress did not approve the plan, then painful cuts in defense and discretionary spending would go into effect (the dreaded "sequesters"). That's exactly what happened. The cuts are scheduled to go into effect in January unless Congress acts by the end of the year. "Now we gotta figure out how to avoid the train wreck which we put in there to avoid the first train wreck," Sen. Carl Levin told Politico.
Coincidentally, the Bush tax cuts and the payroll tax cuts are scheduled to expire at the end of the year unless Congress makes a deal to extend them. The combination of tax hikes and spending cuts will throw the economy back into recession. That's a given. Hence, the fiscal cliff.
The idea is to panic the American public. But so far, the public is not panicked. People know the crisis is an artificial one. It was created by Congress. And it will be ended by Congress. Congress is in a panic because they know that if they allow the country to go over the fiscal cliff, they will be the ones who pay the price. "How did this happen?" voters will ask. The correct answer is, "Congress made it happen."
Haven't we seen this movie before? Yes, we have. In 1985, Congress passsed the Gramm-Rudman-Hollings "Emergency Deficit Control Act." If Congress failed to meet its deficit reduction targets, huge across-the-board spending cuts would go into effect. Just like now. But the sequesters never happened. What did happen is that the first President Bush raised taxes in 1990 and paid a bitter price for it. And the Republican Congress shut down the federal government in 1995 and paid a bitter price for it.
Now Republicans are desperately trying to stop the cuts in military spending. Sen. Lindsey Graham even asked Fox News to do an hour-long show on sequestration. (How's that for a ratings-grabber?) "Tell the public what happens to the finest military in the history of the world if we let this begin in January," Graham said.
Nearly three-quarters of House Republicans and 60 percent of Republican senators voted for the automatic cuts last year. Now they're falling all over themselves to disavow that vote. "It was the wrong vote!" Sen John McCain told Politico.
The blame game, the panic, the brinkmanship -- that's all part of the process. In the end, Congress will work out an eleventh-hour deal to avoid the tax hikes and the sequesters, just like they did last year to avoid default. Do you really think they will allow painful cuts and tax hikes to go into effect just when a president and Congress are taking office?
It's easy to see what the deal will look like. Congress will delay most of the tax hikes and the spending cuts to keep the economy from going south. And they will agree to let the nasty stuff happen later in order to avoid a debt crisis. Meanwhile, the American public will look on Washington with bewilderment and disgust, just as they did last summer. Why do we have to go through all this sturm-und-drang to get the deal done? It's the system, stupid.