With the so-called fiscal cliff now less than a month away, it is time for Congress and the Obama Administration to get serious about addressing the long-term fiscal challenges our country faces. The significant economic damage that would result from a failure to act during the next several weeks should be unacceptable to every elected official, particularly because it represents an unnecessary and self-inflicted wound.
It is worth reviewing where we stand and how we arrived here. By law, Congress is required to authorize any debt issued beyond a certain limit, and in the summer of 2011, the Treasury hit that $14.3 trillion ceiling. As part of the negotiations to raise the ceiling to continue to pay our financial obligations, Congress agreed to establish a deficit-reduction panel tasked with closing the spending gap by $1.5 trillion over the next decade. Less than four months later, that panel dissolved, unable to reach any agreement. As a result of that failure, more than $500 billion in automatic spending cuts are scheduled to begin on January 2 for fiscal year 2013. At the same time, a wide range of taxes, from the payroll tax to the alternative minimum tax (AMT), are set to jump higher immediately, affecting workers across the board. If these changes are implemented as they stand, many economists predict that another recession is all but inevitable.
After a hard-fought 2012 campaign season that left the political landscape in Washington, D.C., largely unchanged, both President Obama and Congressional Republicans have been spending a lot of time lately talking about the mandate they say they received from voters in November: Obama to raise taxes on the wealthy; Republicans to hold the line on current rates.
Both positions are misguided and small-minded. The only mandate voters bestowed on elected officials was a mulligan on the past two years - a chance to return to the negotiating table and find the middle ground. Real leadership is built on compromise, and that is a skill policymakers need to reacquaint themselves with in short order.
What does real compromise look like? It begins with recognizing that there is no silver bullet for our financial challenges. Increasing revenue will inevitably be part of the solution. Meanwhile, Democrats need to realize that we are not just one good tax hike away from prosperity: The keys to a sound fiscal future lie in reforming entitlement spending programs and laying the groundwork for robust economic growth.
The best stimulus for today's economy would be to restore to Americans a sense of certainty and optimism, particularly about our leaders' ability to address the most pressing challenges of our time. Avoiding the fiscal cliff with some common-sense compromises would be a great place to start. It is not too late.