Opinion: Don't Hold Your Breath for a Fiscal Cliff Fix

A friend of mine just asked me what I thought was going to happen on the Fiscal Cliff. I'd like to think that the positive sounding things that House Majority Leader John Boehner, Senate Majority Leader Harry Reid and President Obama have been saying, but much of their comments include worrisome hedging.

Reid ended some positive comments he made a few days ago by saying that Social Security wasn't on the table, while left wing Senator Bernie Sanders told reporters that Reid had told him "very clearly that Social Security has nothing to do with deficit reduction and should not be part of the discussion with regard to deficit reduction."

It's true that the deficits from Social Security pale in comparison to those of Medicare, but it complete and utter mythology to pretend like they aren't a major contributor to debt and deficit issues, both now and especially in the future.

John Boehner went much farther over the deep end, leaving two fat devils in the details of his comments. He's claiming that his party will compromise on raising more tax revenue if it came packaged with entitlement reforms, but he's saying that he's unwilling to raise tax rates on anyone, and isn't willing to cut military spending.

If we're lucky, a compromise will be made on this and taxes will go up on those making a half million or more, along with throwing out some tax loopholes. It's also beyond ridiculous to not look for savings from reduced military spending as we draw down from the wars in Afghanistan and Iraq.

The next, and biggest of them all, devilish detail on the GOP side is that their increased revenue plan relies on something called "dynamic scoring". Your political spin detectors should be chiming right now, as this amounts to just another version of 'voodoo economics'.

This fancy label hides the fact that Boehner really isn't open to new revenue. He's saying that we should just make the tax system more simple (hard to disagree with him there), but that doing so will magically make the economy grow quite a bit faster, and thus increase revenue dramatically. It should be no surprise to anyone that the only "economists" that support this claim happen to be on the payroll of conservative campaigns and/or think tanks.

If the past is any indicator... we shouldn't be too optimistic on any of these fronts. President Obama took a pass on pressing for these sorts of reforms when the Fiscal Commission came out with his recommendations, and has had about two years to throw his weight behind the work the Gang of Eight (formerly the Gang of Six) has been doing.

While Obama has at least given lip service to being open to cutting entitlement spending if it's part of a plan that cuts military spending and raises taxes, Harry Reid and Nancy Pelosi have been clear that they want Social Security and Medicare, the two biggest drivers of long term deficit projections as the Baby Boomers retire, off the table. On top of this, a loud minority of Democrats are even pushing for the administration to allow the country to go over the Fiscal Cliff, putting us back into recession, so the Bush tax cuts expire and military spending is cut.

The Republicans only seem more willing to sink into their right wing fairy tale land where deficits are taken away by tax cut fairies that turn lost revenue into economic boosting wingnut fairy dust.

As has been the trend for the last generation or so, the House and Senate will become even more partisan when it opens it's doors to it's newest members next year. Both parties gained members that will join the most right and left wing segments, and based their campaigns to a large degree on attacking the other party that they now need to work together with to avoid very serious problems coming down the pipe

As if it wasn't clear from what you've read here - I'm not optimistic. I'm hoping that the dire nature of the threat that the fiscal cliff poses will get enough from both sides to pass something with a passing resemblance to Simpson-Bowles, Dominici-Rivlin or other common sensical budget compromise deals... but it wouldn't surprise me at all to see the Paul Krugmans of the world win out and pop their out of touch celebratory champagne as our country lurches back into recession.