The lame duck session MAY produce a compromise if Boner can control the Teabags. But it won't be pretty.

The NYT has a nice piece pointing out that the notion of a "fiscal cliff" hitting the country at the end of the year is fundamentally wrong. The immediate impact of leaving the scheduled tax increases and spending cuts in place through the end of the year will be almost zero. As the piece points out, the dire projections of sharply slower growth or even a recession are not based on letting the December 31 deadline pass, but rather leaving the higher taxes and lower spending in place for the whole year. If Congress and the president were to reach an agreement in January or even February, the impact on the economy would be limited.

http://www.cepr.net/index.php/blogs/beat-the-press/the-fiscal-cliff-doesnt-live-up-to-the-hype


First and foremost the problem is that it is not accurate. It also helps push the Republican agenda on budget policy.

The reason that it is not accurate is that there is no cliff. Contrary to the image conveyed by the metaphor, pretty much nothing happens on January 1, 2013 if there is no budget deal in place. We will all be on a higher tax withholding schedule and in principle the government should be spending at a slower pace, but these effects will be virtually invisible on January 1. In fact, they will just barely be visible even if we go the whole month of January without a deal.

The tales of sharply slower growth and even a recession are based on Congress and the president going a whole year without a deal. At that point the economy will certainly feel the effects of higher with-holdings and slower spending, but that is not what happens from failing to reach a deal by January 1. (Here is a somewhat fuller discussion.)

This matters a great deal in the current context because the Republicans would very much like to force a deal before the end of the year when the immediate issue is raising taxes or not for various segments of the population. After January 1, the Bush tax cuts will have expired. At that point, the question will be who gets a tax cut. This would be a far more advantageous position for President Obama to negotiate from, assuming that he does win the election.

For this reason, wrongly implying an urgency to getting a deal before January 1 frames the debate on terms that are very advantageous to the Republicans in Congress. NPR should go back into the files and dig up a better headline for this series.

http://www.cepr.net/index.php/blogs/beat-the-press/fiscal-cliff-notes-have-no-place-on-npr

The Alex Wagner show this AM was all about this topic...

contradictory information?