This fiscal cliff: averted.
Next fiscal cliff: ahead.
divisions and brinksmanship politics defined the outgoing Congress
right up to the final scramble to avoid the "fiscal cliff." The
last-ditch deal dodged income-tax hikes for nearly all Americans and
delayed for two months spending cuts for the Pentagon and domestic
Still, the compromise didn't solve, or even seriously
address, the deficit problems that prompted Congress to write the laws
that nearly forced the nation over the cliff in the first place.
was the overture for the opera that's to come," says Robert Reischauer,
a veteran of Washington's budget wars, "and that opera's going to be a
lot more discordant than the overture was." The new Congress starts at
In the end, the eight-week "fiscal cliff" battle
required an all-out effort by President Obama and tested his
relationship with House Speaker John Boehner, R-Ohio. Their failure to
reach an accord brought a surprise late entry by Vice President Biden, a
Senate veteran who wrangled a deal with Senate Minority Leader Mitch
McConnell after talks floundered with his Senate counterpart, Majority
Leader Harry Reid.
The battle spotlighted not only the burgeoning
debt problem the country faces but also the political system's
inability, at least so far, to come to a long-term or lasting solution
on how to fix it.
In the aftermath, there are some lessons that
could be helpful for the next time around - about the players who
mattered, and the issues that divided. Because there is going to be a
next time, and soon.
Lesson 1: The danger of ignoring spending cuts
the dust settles from the fight over the fiscal cliff, policymakers are
positioning for looming battles between Obama and a divided Congress
over issues that will affect the bottom line for the nation's economy
and American households.
Republicans are relishing a debate over
federal spending in the new 113th Congress, particularly for
entitlement programs such as Medicare and Social Security. They see
three big opportunities as Washington faces deadlines in February on the
debt ceiling and in March on spending cuts and government funding.
intend to use the debt-ceiling debate and the government-funding debate
as a way to negotiate real spending reductions," vows Rep. Mick
Mulvaney of South Carolina, a fiscal conservative elected in the 2010
Tea Party wave. Like many fellow Republicans, he expresses frustration
at the GOP's record of cutting spending in the past two years. "Fiscal
conservatives - and you can include Tea Party people in that but it's
more than just that - we're frustrated that the battle over spending is
always going to be next time."
Republicans waged a similar fight
in 2011 over the debt ceiling, which rattled financial markets and
prompted Standard & Poor's to downgrade the nation's credit rating.
It led to the creation of a special congressional panel to come up with a
deficit reduction package - it failed - as well as the automatic
spending cuts that were part of the fiscal cliff. The new deal defers
that so-called budget sequester for two months.
Also ahead: Funding to keep the government running ends March 27.
has declared he won't allow Congress to use the debt ceiling as a lever
to win spending concessions, but it's not clear how he can avoid that.
McConnell said Wednesday that Republicans are working on a package of
spending cuts they want to see enacted, including entitlement reforms,
in exchange for voting to raise the nation's borrowing limit.
The potential for the United States to default on its debt is a far
more terrifying economic threat than the fiscal cliff posed, Hoagland
says. "That's what scares me more than anything else," he says of the
global ramifications of a default. "If we lose the ability to be the
best place in the world to lend money to, then we really have real
GOP willingness to battle over the debt ceiling again
has exacerbated the ideological divide between the two parties. "These
artificial crises create uncertainty that's reflected in the economy,
and the economy is not growing as fast because of these crises we're
manufacturing," says Rep. Jim McGovern, D-Mass. "I feel like this is the
'Twilight Zone' Congress. It just never ends."
Lesson 2: Delivering a united GOP is elusive
fiscal cliff revealed an uncomfortable reality for Speaker Boehner: In
the old Congress, he couldn't command a majority of his caucus on the
fiscal cliff vote; Republicans opposed it 151-85. That raises questions
about his ability to deliver votes and potentially undermining his
negotiations with a Democratic president and U.S. Senate in upcoming
budget fights in the new Congress.
His rank-and-file refused to
support his "Plan B" last month to avert the fiscal cliff during his
early unsuccessful negotiations with Obama. There is little precedent
for a speaker failing to pass a bill over which he has personal
ownership. It weakened Boehner's role in the fiscal cliff talks going
forward, which were ultimately resolved in large part by Biden and
House Republicans initially threatened to take down the
compromise on Tuesday, which had earlier passed the Senate with an
overwhelming show of support, 89-8.
Economic and political
realities forced GOP leaders to bring the bill to the floor, upending an
earlier Boehner promise to not allow a vote on anything that could not
muster the support of most of his members. That's the informal "majority
of the majority" rule that has governed House Republican internal
politics for more than a decade.
Among the 236 Republicans who
voted on the measure, only 85 voted for the fiscal cliff deal. Passage
was secured by 172 Democrats who voted for it.
While Boehner and Budget Chairman Paul Ryan, R-Wis., supported the
compromise, the speaker's chief deputies, Majority Leader Eric Cantor,
R-Va., and Majority Whip Kevin McCarthy, R-Calif., voted against it,
highlighting fractures among the leadership team.
When the House
convenes today, its first act will be to elect the speaker, which is
voted on by the full House because it is a constitutional officer, not a
There is little doubt that Boehner will be
re-elected. No other lawmakers have said they will challenge him. He
remains personally well-liked among his members. Boehner allies contend
the Ohio Republican is in good standing with his members because he
allowed the party to work its will, versus a top-down style of
management that has historically defined House politics.
all. Why should it?" Rep. John Fleming, R-La., said when asked whether
Boehner's speaker post was in doubt. "I think we're more together on the
same page now than we have been in a long time." Like McConnell,
Boehner has pledged to make fiscal issues a top priority, particularly
an overhaul of the federal tax code and using the upcoming budget fights
to attempt to win more spending cuts.
He begins that task with a
trust deficit, though. "It's about whether or not they can lead,
particularly Boehner, to see if he can lead that particularly raucous
group he has to deal with," Hoagland says.
He also begins with a
smaller majority. Following the 2012 elections, Republicans will have
eight fewer seats in the next Congress, 234-201. The Democratic majority
in the Senate will grow by two seats, to 55-45.
Lesson 3: The indespensible Joe Biden
President Biden has been a favorite of late-night comics for his
tendency toward verbosity and the occasional malapropism, not to mention
a campaign photo of him holding a tattooed woman biker in his lap.
fiscal cliff debate negotiations underscored a different facet of Biden
and one of the major reasons Obama picked him to be his running mate in
2008: The former Delaware senator's four decades of experience in
Congress, a venue where the president has struggled to develop close
friends and personal allies.
When Obama popped into the White
House briefing room on Tuesday night, after the House and Senate had
voted, he praised not only the congressional leadership but also "my
extraordinary vice president, Joe Biden."
"Biden is a pro," says
Thomas Mann, a congressional scholar at the Brookings Institution,
citing his legislative experience and energy. "He's done a lot of heavy
lifting for him."
When negotiations between McConnell and Senate
Majority Leader Harry Reid, D-Nev., flagged last weekend, the Republican
leader announced he had called Biden. The two men spent hours on the
phone late Sunday, early Monday and beyond. They helped negotiate the
deal that eventually passed the Senate by a decisive 89-8, then, after
some contentious objections, passed the House 257-167.
Meanwhile, Obama's comments at a campaign-style event Monday as the
Senate was debating the deal brought criticism from Republicans who said
his tone was derisive toward them. "I know the president has fun
heckling Congress," Tennessee Republican Sen. Bob Corker said. "But I
think he probably lost a number of votes with this."
Biden and McConnell already had become one of the most significant bipartisan acts in Washington.
the debt-ceiling debate in 2011, negotiations between Obama and Boehner
for a "grand bargain" deteriorated in mutual recrimination, Biden and
McConnell stepped in and cut a smaller deal.
In the upcoming
negotiations, Biden could be tapped again. He's already a key figure in
another big battle this year. Obama has given him until the end of
January to develop proposals addressing gun violence in the wake of the
bloody rampage last month at Sandy Hook Elementary School in Newtown,
Conn., that left 20 children and six educators dead.
high-profile role is fine with Biden. He's made it clear he hopes to run
for the Democratic presidential nomination in 2016.
Lesson 4: Fixing the deficit? It's hard
urging the White House and Congress to "fix the debt" are on display in
the Washington Metro stations that congressional staffers and
administration officials use to catch the subway. But one clear lesson
from the negotiations that were just concluded: It's not easy.
when the major drivers of the debate are the spiraling costs of some of
the country's most popular programs, among them Medicare and Social
Security. Not when neither side will even broach the idea of raising
taxes on the 98% of Americans who earn less than $250,000 a year in
household income. And not when most House Republicans are willing to
oppose their own leadership and vote against all tax hikes.
at one way, the dollar number in new revenue sounds huge. The deal cuts
about $600 billion from budget deficits over the next 10 years by
raising taxes on the wealthy.
However, that represents just 7% of
the projected increase in the national debt over that time. Instead of a
$25.4 trillion debt in 2022, the debt would be $24.8 trillion.
did the politically easy thing," says Douglas Holtz-Eakin, a former
director of the Congressional Budget Office who advises Republicans.
wonder that bond-rating agencies, not to mention both Democratic and
Republican budget experts who have worked on deficit deals in the past,
The tax rate increase in income above $400,000
for individuals and $450,000 for couples is one of three ways taxes will
rise this year. Most Americans will see their payroll taxes rise back
to the customary 6.2% rate. Higher-income families will have to pay more
to help finance the Affordable Care Act, Obama's health care law.
the desserts outweigh the vegetables in the package. Tax cuts for more
than 98% of Americans, enacted in 2001 as temporary, were made
permanent, and a host of other tax breaks were extended. The automatic
spending cuts, scheduled to bite $110 billion this year, were delayed
for two months.
"Our generation created this mess, and I thought
this was a real opportunity for us to clean it up," says Erskine Bowles,
who negotiated the 1997 balanced budget agreement for President Clinton
and co-chaired Obama's fiscal commission that recommended nearly $4
trillion in deficit reduction. "My hope is we don't put everything off
again to the very last second."
That last second will come several
more times this winter. Before spring arrives, the government's $16.4
trillion borrowing limit will be breached, some $1 trillion in
across-the-board spending cuts will be triggered and a government
shutdown will be threatened unless the White House and Congress can
agree on more compromises.
Moody's Investors Service isn't
counting on those compromises. The rating agency, which last year gave
the government's triple-A rating a "negative outlook," announced no
improvement as a result of this week's deal. "Further measures that
bring about a downward debt trajectory over the medium term are likely
to be needed to support the AAA rating," it said.
Translation: cut spending, raise more revenue or risk a credit-rating crisis later this year.
if the president and Democratic lawmakers were worried about that
Wednesday, they didn't show it. Obama boarded Air Force One for Hawaii
on Tuesday night; he was on the golf course 16 hours after the House
passed the fiscal cliff compromise. Democratic leaders were urging swift
passage of $60 billion in disaster relief for states affected by
Superstorm Sandy in October.
Republicans, meanwhile, were calling
for swift action on spending cuts. "We've taken care of the revenue side
of this debate," McConnell said. "Now it's time to get serious about
reducing Washington's out-of-control spending. That's a debate the
American people want. It's a debate we have next. And it's a debate
Republicans are ready for."
But the bad blood from the fiscal
cliff "did nothing but make further cooperation more difficult," warns
Reischauer, also a former director of the Congressional Budget Office.
That doesn't bode well for Obama's top priorities, among them an
immigration overhaul, energy legislation and gun control measures - each
a tough fight on their own.
"What we fought for in 2012," the
president told supporters in an online video posted Wednesday, "we've
got to fight just as hard for in 2013."