The fiscal cliff, the debt cliff, and the political cliff

We’ve written, as has virtually every other commentator, about the “fiscal cliff.” But the term is probably a misnomer. It refers to the fact that, absent a budget deficit deal, taxes will rise on everyone who pays them and federal spending will be cut. The combined effect would be a small but discernible change in fiscal policy that might well slow the economy down or, given how slow the economy already is, possibly throw it into a recession. That wouldn’t be a good thing, of course, but arguably it is melodramatic to call it a cliff, particularly since it’s not clear that a recession actually would occur.

There is an economic cliff out there, though. It’s the debt cliff. Eventually, our nation’s massive debt will lead to a serious crisis of the kind certain European debtor nations are experiencing. But that cliff doesn’t face us at the end of the year or, in all likelihood, very soon.

Even so, the time to deal with the debt cliff is now. Delay only will make the cliff steeper.

Unfortunately, only the Republicans are serious about acting now to avoid the debt cliff. The Democrats are debating among themselves whether entirely to bypass entitlement reform — a prerequisite to dealing meaningfully with the debt — or to nod in the direction of such reform without really tackling it. And the Republicans, controlling only the House, cannot force the Democrats to get serious about entitlement reform because the Dems would rather go over the so-called fiscal cliff than take the tough measures that would put Medicare and Social Security on a sound long-term footing.

This brings me to the third cliff — the political one. It’s the cliff that one of the two parties will likely go over if no budget deficit deal is reached, we therefore go over the “fiscal cliff,” and the economy spirals into a recession.

The conundrum here is that no one knows for sure which party would receive the primary blame and thus go over the political cliff. It might be the Democrats. After all, Obama is the president and the Dems control the Senate. A second recession under this political arrangement might be blamed, as it should be, on the Democrats.

But Obama doesn’t have to face the electorate again and Senate Democrats will face it in 2014 from a position of strength due to the fact that Republicans will probably need to pick up six seats to take control.

In the House, by contrast, the election is a jump ball. Every seat will be in play, with the Democrats needing only a simple majority. Should they get it, and assuming they keep control of the Senate, the Dems will be in full control of both chambers of Congress and the presidency. Moreover, the Senate rules will likely have changed to the point that the Dems can impose their will without 60 votes. Under these circumsstances, Obama will be well-positioned to enact a radical and transformative agenda.

That’s what I call going over the cliff.

Because Republicans cannot do much about the debt cliff and because going off the political cliff would be catastrophic, Republicans must approach negotiations regarding the fiscal cliff cautiously. They should not feel guilty about doing so. If the American people had given Republicans the power to make major headway on the debt, the party would be obligated to try whatever that takes, the political consequences be damned. But the electorate chose to give Republicans only a little power.

With a little bit of power comes a little bit of responsibility. This means bargaining hard to reduce spending and to do some entitlement reform. It does not mean taking positions that will strike voters as so hardline that Democrats will be able to portray Republicans as the villain of the piece, i.e., the reason why the country went over the fiscal cliff and experienced an economic downturn.

Again, if Republicans had the power to impose unpopular debt reduction measures, they would be obligated to impose them. But since they lack the power, they shouldn’t go over the political cliff in the name of gesture and ideological purity.

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