Politicians of both parties are playing a dangerous game of chicken with the nations economic health. But the only people who can realistically resolve that situation are the voters. The unanswered question at this point is whether they will.
Absent compromise, come January the United States could go off what Federal Reserve Chairman Ben Bernanke called a fiscal cliff. Meaningful action before the November election seems out of the question and even then it is likely to be hard.
The problem is huge and wholly deliberate. Worse, every element is on automatic pilot and each requires action by both houses of Congress and the president to correct.
The Bush tax cuts are slated to expire at years end. Letting that happen might help the deficit, but it would also drain billions of dollars from an already weak economy. Nonetheless, Republicans and Democrats are at odds over whether to extend the cuts to all income levels or just on income up to $250,000 per year.
The Social Security payroll tax cut most taxpayers have enjoyed for the last two years is also scheduled to expire. That would cost American workers $120 billion per year. But as the Wall Street Journal reported Wednesday, neither party is pushing to extend it.
Also in January, the federal government is expected to reach its debt limit again. As the Washington Post reported, House Speaker John Boehner has already promised another fight over increasing it. A similar fight last summer brought the U.S. Treasury close to default.
That same battle also resulted in another potential January disaster. The agreement that ended the debt limit fight included a provision that if no larger spending agreement were reached $110 billion would automatically be sequestered cut from spending with half being taken from domestic programs and half from defense.
That was purely political. Domestic spending is the Democrats favorite; the Pentagon is the GOPs. The assumption was that neither party would let their sacred cows be sacrificed. And perhaps they will not. But it appears that thinking underestimated the nastiness of todays political climate.
The automatic nature of the pending cuts allows for hyperbole all around. A Pentagon official told The Associated Press that troops headed to Afghanistan would get less training, but made no mention of slowing down the acquisition of high-dollar weapons systems. National Public Radio reported a senator told a Florida community its local Air Force Base is toast. Estimates of potential job losses if sequestration is allowed run from 1 million to 2 million.
Those are almost certainly exaggerations, but the potential for disaster is real. If all the year-end changes are allowed to occur the economy could take a serious hit. Defense contractors have talked of sending layoff notices to tens of thousands of workers in early November.
That timing gives the game away, but their thinking has a basis in fact: It is the voters who must fix this, and they can do so in two ways. They can give control of the White House and both houses of Congress to one of the parties and hope for the best. Or voters can declare that they have had enough of playing games and reject candidates of either party who refuse to compromise and work together. The latter may be the more permanent fix.
