Living With the Cliff

Speaker Boehner’s debacle in failing to get his own caucus to support his “Plan B” is not only his failure, it shows the complete disarray of the congressional Republican Party. They are simply incapable of a coherent response to a problem that calls upon them to go beyond campaign talking points.

This gives the President and Democrats in the House and Senate an opportunity to set fiscal cliff policy, in two stages. First, before the end of 2012, they should pass a bill in the Senate that would end the Bush tax cuts for those earning over $250,000 per year, as the President promised during the campaign. The bill should also extend unemployment coverage for the long-term unemployed, extend the debt limit for at least a year, and adjust the Alternative Minimum Tax to inflation. It should suspend (not cancel) the mandatory across-the-board spending cuts in the Fiscal Cliff law.

The 52-47 Democratic majority in the Senate is ample to pass the bill; a Republican filibuster would just reinforce the idea that, if we go over the Cliff, it’s the Republicans’ fault. Similarly, the Speaker has little choice but to bring the bill to the floor, in the knowledge that most Republicans would vote against. If enough reasonable Republicans can be found, then the bill will pass and the President will sign it. It will be enough of a gesture to keep the markets from tanking, and keep the economy from tipping into recession.

If enough House Republicans cannot be found to join the Democrats in passing the bill, then, again, we go over the Cliff and it will be perfectly obvious that it’s the Republicans’ fault. It could cause the kind of financial panic that would put us back into recession—again, blame the GOP.

Still, for long-term policy, going over the Cliff may be the better option at this point. The new Congress will have more Democrats in both houses, facing a situation where anything they do on taxes will amount to a cut from the rates established by the Cliff. And on the spending side, the sweeping cuts will give the opportunity to do triage on which programs really deserve to have the cuts rescinded, and which do not.

If the Republicans really want to restore the cuts in Defense, they will have to actually find new funds to do it. And the Democrats will have to get more serious about controlling escalating medical costs without simply passing the bill onto the consumers, as Paul Ryan wants to do.

Finally, confronting a changed environment at the bottom of the Cliff in January gives us a chance to remember, as Paul Krugman and Robert Reich remind us, that in the short run we still need to stimulate the recovery. Reducing the debt is a long-term problem; it is not a good idea to try to solve it in the week between Christmas and New Year.

John Peeler is a retired professor of political science at Bucknell University, specializing in Latin American and international affairs. His post first appeared on LA Progressive and is republished with permission.