Notwithstanding the impact of Sandy, I have much to be thankful for, including this year’s very welcome Thanksgiving Day break. But what I am most thankful for is not yet a done deal but rather a new feeling that suggests we will avoid the fiscal cliff. The meeting a week before Thanksgiving between the Congressional leadership and President Obama seemed to end with a sense on all sides that fiscal disaster could be avoided. In my opinion, there is no choice but to do so, but I am a spectator and Congress and the President are the ones who need to make it happen.
What needs to happen is compromise. There need to be revenue increases and there need to be spending cuts, but there is more than one way of accomplishing each of these necessary goals. Tax rates are at the heart of the issue and key to any compromise. The democrats want a tax increase for the wealthy; the Republicans want no increase in tax rates whatsoever. The magic number, where a tax increase will once again be imposed, has been $250,000 but compromise requires not only a different number but also a different solution. There are such solutions readily available and finding them is not by any means rocket science. The solution needs to be crafted through limiting the deductions, exemptions, credits, and favorable tax treatments that are part of the current tax code. By diminishing tax breaks on the very wealthy, we can have the same effect as tax rate increases would have, all without changing the nominal tax rates.
Spending cuts are also part of any compromise and solution but automatic “sequestration” on January 2 is not the answer. Here too, we can accomplish what is needed while still minimizing the impact on the key safety net legislation which so many of us value so highly. Dismantling Obamacare is not an option. Our citizens deserve a health care safety net; it cannot be bargained away. But not every expenditure needs to be protected or can be protected. Given the magnitude (half a trillion dollars) of the reductions sought, there may not be time between now and January 2 for all the changes to be identified. Certainly however we need a major reduction in spending identified by the start of 2013.
Being thankful for something that has not yet happened is always a risk. My feeling that a cliff can be avoided may or may not be correct. Hopefully, it is not based on false optimism generated by the return of electricity. The Congressional leaders and the White House need to keep talking and working until the compromise is complete. And this time we need to hold our public officials completely accountable. If a compromise is reached, we need to applaud their efforts. If the country wins by avoiding a fiscal cliff, we all win. And if the compromise doesn’t happen and we are faced with a recession following a weak recovery, here too our public officials must be fully accountable. Voting them out of office is then the only appropriate response.