Late at night on New Year Day of 2013, the House voted after much last minute handwringing to accept the Senate compromise bill to avoid the Fiscal Cliff.
Reality is that the cliff has not been averted, just the rough edges of it.
Along the way many bargaining chips were wasted to get very little.
On December 31st the national credit card hit its limit. Treasury Secretary Geithner says that he can move some things around to pay the bills through sometime in February. Our new Fiscal Cliff Avoidance Bill of January 1st 2013 now adds almost $400 billion per year in new national debt per the CBO’s analysis.
LAW OF UNINTENDED CONSEQUENCES
The Republicans now own Obama in the next round of negotiations over increasing the debt limit. That crisis hits within six weeks. As the Washington Post put it: “The bill avoids austerity but doesn’t tame dangers of national default, high unemployment or swelling debt.”
There is little to rejoice about in the Senate bill, now approved by the House, because it is fiscally irresponsible. It will cause much of the good that it has supposedly created to collapse in upon itself … not within years but within months.
The GOP itself has major issues and #1 among them is that its has allowed itself to be held hostage by the Tea Party mentality of talk a tough game without having any specifics. It has also allowed ideologues like Grover Norquist and the disciples of Arthur Laffer to warp the ability of the GOP to think in terms negotiating for the greater good of the country rather than the GOP just following unproven maxims that always seem to increase the debt rather than resolve it.
Back in the good ol’days of RINOs ruling the GOP, our national debt was relatively low and social policy moved forward in some sense of balance because people went to the negotiating table with the intent of getting a balanced deal of trading off benefits and finding bill payers, and cutting debt where possible — and we often did cut a lot of debt.
Back during the good ol’days of the 1950s/60s/70s/80s Dems and Reps were able to work together on many things that kept debt low or paid down the debt while accommodating social concerns.
However, what the GOP has going for it now is that it owns the House vote at the precise moment that President Obama will need agreement on a host of issues for which he does not have many bargaining chips to put on the table.
We will see the stock market’s view of this deal play out over the next week. Whether you love or hate Wall Street, the stock market is considered a fairly reliable indicator of which way the economy is going.
$400 billion of new debt per year has just got to scare investors worried that the nation’s #1 purchaser of services, goods and materials may not be able to pay its bills either on time or in some cases be able to pay them at all — forcing renegotiation.
We also have the FY2013 federal budget to complete. Our new federal year started in October and we still have no approved federal budgets. Those too must now be negotiated with many in the new Congress of a mind to to pare back spending to offset this Fiscal Cliff deal.
In our aversion to negotiating in good faith (both parties) we have avoided the Fiscal Cliff from arriving on January 1st, 2013. But in doing so we have merely bought breathing space of just 1-3 months before we must return to the negotiating table for what are perhaps even larger stakes.