Why the fiscal cliff impasse doesn't matter - so far

Any discussion about the “fiscal cliff” back-and-forth between Democrats and Republicans needs to be put in this frame: It’s Dec. 4. There’s almost three weeks to go before Congress heads home for the holidays. It’s too early for outrage about the White House proposal last week that was designed to appeal to Democrats. It’s too early for scorn at the Republican proposal Monday that did the same for the GOP base.

What’s happening now is what happens with most negotiations. Each side is in the wish list phase, declaring the items they want most and drawing the lines they say they won’t cross. This serves to both publicly reafffirm a philosophy and, more importantly, to provide a place at which both sides might later point and show how much they were willing to compromise.

For Republicans on Monday, that again involved defiant declarations about not raising tax rates – although most everyone expects GOP leadership to bend some, given the election results and the fact that tax rates will go up, anyway, if a deal isn’t struck this month. Democrats, meanwhile, are scoffing at any semi-specific suggestions of social spending reform.

“That’s just a kabuki theater,” debt guru Erskine Bowles told PBS NewsHour on Monday. “If they got to agreement – the way Washington is – too quickly, their own side would just kill them because they wouldn’t think they had negotiated hard enough. They got to go through this exchange.”

But beneath all the posturing, a framework of a serious deal might emerge. With their proposals on Social Security and Medicare, Republicans are laying the groundwork for social spending reform – not merely trims around the periphery that solve little long-term. In return, they will have to give on tax rates on the rich going up – at least a little – but that also would be accompanied by an examination of tax deductions and loopholes. Those are the baby steps of the tax reform we need.

One thing we do know about both proposals thus far: Neither comes close to the kind of savings we need to make a real dent in the deficit. Bowles has long said that the $4 trillion the Simpson-Bowles plan saves over 10 years is about the minimum the country needs to do. The most recent Democrat and Republican proposals are hovering near the $2 trillion mark.

That’s not nearly enough, and three weeks won’t likely get us much more in the way of deficit reduction. But the foundation might be built for something more, so long as neither side decides that a win is more important than a compromise.

Peter St. Onge       

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