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‘Fiscal cliff’ not too precipitous

President Barack Obamshakes hands with House Speaker John Boehner Ohio Roosevelt Room White House WashingtFriday Nov. 16 2012 during meeting

President Barack Obama shakes hands with House Speaker John Boehner of Ohio in the Roosevelt Room of the White House in Washington, Friday, Nov. 16, 2012, during a meeting to discuss the deficit and economy. (AP Photo/Carolyn Kaster)

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Updated: December 19, 2012 1:43PM



WASHINGTON — My bet is President Barack Obama and GOP and Democratic congressional leaders do not make a final deal by year end to avoid the “fiscal cliff” — the negotiations will spill over a few months.

Even if the Dec. 31 deadline passes without a tax, spending and deficit package in place, the overall impact would not hit the economy immediately. Consider the effect more a “fiscal slope,” Sen. Dick Durbin (D-Ill.) told me. One potential scenario: A stopgap measure could emerge to buy some more time.

Obama met with the four top House and Senate leaders on Friday — and the public statements after the meeting were optimistic about striking a deal to boost federal revenue and cut spending by Jan. 1, when drastic automatic tax hikes and reductions no one wants will take place.

However, in precincts I checked with, there is the recognition that there just may not be enough time to rewrite the tax code and wrestle with soaring Medicare, Medicaid and Social Security obligations — called entitlements — before Dec. 31.

Congress left for Thanksgiving on Friday. The lame duck session resumes in December. Obama left Saturday for a four-day swing through Thailand, Burma and Cambodia. He arrives in Bangkok on Sunday

Staff negotiators from the White House and Congress will keep on working as time is running short. And while there are some solutions “on the shelf” — I’m thinking here of the Simpson-Bowles recommendations — the GOP House members have a new dynamic: What Obama wants most — and first — is for Congress to pass a law to prevent tax rates for most people automatically increasing Jan. 1.

Obama underscored that again in his Saturday address where he kept pressure on Congress “to pass a law right away to prevent a tax hike on the first $250,000 of anyone’s income. That means all Americans — including the wealthiest Americans — get a tax cut. And 98 percent of Americans, and 97 percent of all small business owners, won’t see their income taxes go up a single dime.”

“The cliff was designed by Democrats and Republicans to be terrible, and it is. So let’s avoid it,” said Durbin, who will be a key negotiator.

After Congress returns next month, with only about three weeks to work in December, Durbin said, “it is a limited opportunity. We go into the first of the year and that means the new members will face it.” The new Congress gets sworn-in on Jan. 3.

And what is the impact if there is not a deal? No cuts happen immediately.

“It’s not a cliff, it’s a steep slope. We don’t want to start down it, you know, because it really could kill the recovery and impose taxes on working families, which the president doesn’t want, I don’t want it. But it is going to force our hands to do something,” Durbin said.

If the wrangling “goes into a month or two of the new year, we can do it,” Durbin told me.

An aide to House Speaker John Boehner (R-Ohio) — passing along information on background — also suggested this won’t be done by Dec. 31. It doesn’t take too much reading between the lines to see Boehner expects negotiations spilling over to next year.

“The Speaker said he believes 2013 should be the year we begin to solve our debt problem through tax reform and entitlement reform, and proposed that both parties work together to avert the fiscal cliff together in a manner that ensures 2013 is that year. He proposed that both parties commit to working toward a framework for tax and entitlement reform in 2013 that sets revenue and spending levels. This is a construct all present agreed was needed,” the aide said.

Here are my predictions — based on my reporting — about what will happen:

† There won’t be a deal covering everything by Dec. 31; instead there will be in essence a vote in Congress about a deal to make a deal — with substantive savings identified in a “framework” measure Congress would vote on. Congress would vote to sideline the draconian cuts and prevent tax rates from increasing for most of us — which would keep the markets from being rattled.

† Since Obama will not budge over not extending the expiring Bush-era tax hikes for the 2 percent who are wealthy, key to this stop-gap scenario could well be this: Boehner and Democratic Leader Nancy Pelosi (D-Calif.) will each contribute to a “structured” roll call on a compromise. There are Democrats who under no circumstances want entitlement cuts; there are Republicans who will go to the mat over preserving tax breaks for folks who make more than $250,000 a year. Boehner and Pelosi will have to contribute members who can take the heat on this vote to make it a bipartisan roll call.



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