If ever there was a case for putting off until tomorrow what could be done today, the deeply divided US Congress and President Barack Obama probably have solid ones when it comes to the "fiscal cliff" they face. It's not that all 535 members of Congress and the Obama administration are sitting around, twiddling their thumbs until after the November 6 elections, especially with a scary European economic crisis threatening US growth.
On any given day, a stroll through the halls of Congress will find lawmakers huddling with each other or with outside officials to discuss the December 31 expiration of Bush-era tax cuts, the January 1 roll out of deep, automatic spending cuts and the early 2013 need to raise US borrowing authority or risk default.
These "gangs" of deficit-hawk lawmakers have been meeting informally for more than a year with little result. "It's the bridesmaid group - always left at the altar," said Ethan Siegal, who heads The Washington Exchange, a firm that advises institutional investors on US politics. The problem, it seems, is that "they can bring interesting, pragmatic and actually reasonable policy ideas to the table, but they don't bring political juice to the table," Siegal said.
The missing "juice" would be the backing of the top four leaders - Republican and Democratic - of the House and Senate. The gangs play a role nonetheless. Members believe Congress needs to be prepared for what is coming, and the loosely formed groups of lawmakers want to get legislation ready so it can be pulled off the shelf when needed. Nobody doubts the enormity of the task, as congressional aides commonly refer with dread t o the six months worth of work they will have to jam into a six-week "lame duck" post-election work session.
So, as long as interest rates for borrowers remain low and the US economy avoids a nosedive this summer and early autumn, there are plenty of reasons - most of them political - for Democrats and Republicans to cool their heels and await the voters' verdict before engaging in the hard bargaining that is certain to produce results at the end of this year.
STICKING TO TALKING POINTS A look at duelling remarks on Friday by Obama and House of Representatives Speaker John Boehner leaves little doubt that serious negotiating is nowhere at hand. "Given the signs of weakness in world economies, not just in Europe but also some softening in Asia, it's critical that we take the actions we can to strengthen the American economy right now," Obama warned at a press conference. He then rattled off a list of must-do jobs programs and other stimulus steps that Republicans rejected months ago.
About an hour later, Boehner countered that "We have time to deal with this." He then fell back on long-held talking points: "If you want to create more certainty for employers, let's extend the tax rates, let's stop the regulatory onslaught, and let's deal with our debt." Amid all the breathless pronouncements on Capitol Hill about the "fiscal cliff," some senators do take a deep breath and advise a go-slow approach.
"Most of us believe the reality is that unless there is a real crisis that affects things in a big way, probably the time (to act) is after the election," said Republican Senator Bob Corker, a senior member of the Senate Banking Committee. Corker was one of a number of senators from both parties who heard a blunt assessment of global economic worries from New York Federal Reserve Bank President William Dudley and World Bank chief Robert Zoellick during a closed-door meeting at the Capitol on Tuesday.
WHY WORRY? The European crisis and poor US jobs numbers last month weighed on US stock prices earlier this week and helped push interest rates to fresh lows. But by mid-week the mood on Wall Street was more upbeat and a big upward swing in stock prices kept any talk of early compromise on tax and spending issues at bay. When asked whether an economic crisis in Europe could force Congress to act sooner rather than later to avoid the fiscal cliff looming at the end of the year, Democratic Senator Max Baucus noted that the stock market was up more than 200 points that day. "What's the worry," he said.
It was a tongue-in-cheek response by the powerful Senate Finance Committee chairman, but it reflected the general feeling by financial analysts and lawmakers that as long as the US economy stays out of trouble, there is no reason to move from fixed political positions and compromise ahead of the election. Enough cannot be said about hardball political calculations driving an end-of-year deal and not sooner.
---- Last summer's debt limit/deficit-reduction negotiation between Obama and House Republicans ended in so much bitterness and mistrust that the two sides refuse to engage each other with their jobs on the line on November 6.
---- If Obama wins re-election, he knows he'll be in a better bargaining position than he is now to win a long-term increase in Treasury Department borrowing authority, possibly averting the tortured negotiations Republicans put him through in 2011.
---- If Obama is defeated, his administration could probably delay any debt-limit showdown until after Romney takes office in January 2013, leaving the new president to thrash out a resolution with the small-government Tea Party wing of his own party.
---- Victor or vanquished, Obama will still be president on December 31, 2012, when the Bush tax cuts expire. Either way, he's in a position to dare Republicans to jeopardise tax cuts for moderate-income voters in order to preserve the tax cuts for the wealthy.
---- Republicans, increasingly confident that they will win the White House and possibly take control of the Senate, also want to wait until after the elections to cut a deal. They would have far more leverage at that point to push for maintaining all of the tax cuts and diverting planned spending cuts away from the Pentagon and toward domestic programs. "What we'll do before the election is create a fertile ground for the next president, number one, and number two work on our own proposals that we can suggest," Republican Senator Lamar Alexander said.
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