Hope springs, at least for now by Marjorie Arons-Barron

The entry below is being cross posted from Marjorie Arons-Barron’s own blog. You can find it here.

Congress returns to work tomorrow, and there are a few reasons to be hopeful that the two parties may be able to negotiate a solution to the fiscal crisis, the so-called fiscal cliff that looms ahead. House Speaker John Boehner has indicated that he would accept new revenues (elimination of deductions and exemptions if not an increase in the tax rate) in exchange for structural reforms in entitlement programs.  Senate Minority Leader Mitch McConnell is somewhat more bellicose.

President Obama, while restating he won’t balance the budget on the backs of the middle class and insisting on asking the wealthy to pay more, is also prepared to take steps to control costs of entitlements like Medicaid and Medicare. Let’s hope that Democrats to his left are willing to have such changes on the table and give them serious consideration, and not dismiss them a priori.

The President has  invited leaders of both parties to the White House on Friday.  Before then, he’ll meet with labor leaders tomorrow, business leaders on Wednesday, and also reach out to civic leaders to get their input. He says, “I’m open to compromise. I’m open to new ideas.”

These more conciliatory expressions aren’t limited to top officials.  Sunday, neo conservative guru William Kristol said he sees nothing wrong with taxing millionaires more.  His is one important voice in what is yet  a techtonic shift in the thought leader dialogue. There is consensus,  if the election provided a mandate, it is a mandate to end the partisan bickering.

Can they do it?  The stakes are high.  If our elected leaders fail and sequestration does kick in, everyone – regardless of income – will pay higher taxes. The military will be bludgeoned with potentially hurtful cuts, as will most domestic programs, including all-important education, infrastructure and research.  Former Obama Administration Christina Romer wrote in the Sunday NY Times that it wouldn’t be such a bad things if, on January 1, the trillion-dollar combination of tax increases and spending cuts actually kicked in.  A permanent dive over the cliff, she agrees, would have severe consequences for our gross domestic product. But the plunge for a few weeks or months “wouldn’t be catastrophic.”  She argues that going over the cliff might free lawmakers from “the straitjacket of having signed Grove Norquists’s pledge never to raise taxes.” (Even Paul Krugman seems to be positioning himself to support a dip over the cliff.)

While Romer may be right in terms of long-term economic damage, she is wrong not to shrink from the profound psychological damage that failure to negotiate a solution would inflict on the American people, most of whom do not view compromise as “the President’s getting his own way” but as the way a democracy is supposed to work. The media would do well not to use language that reports movement by either side as “blinking.”  That said, it’s important for the President to use the political capital the election gave him to strike a sensible bargain, not give away too much as part of his opening gambit.

This week’s meetings could help predict whether optimism is warranted.  Leaders have a little over five weeks to get the job done. It’s in all of our interest that they come up with a comprehensive solution now, rather than kick the can down to the next Congress and make the United States look a little too much like the nearly paralyzed and inflamed country of Greece, which it most definitely isn’t.  The campaign is over. The time for hyperbole is past. In a troubled international economic environment, the United States is better off than most countries.  It’s time for our leaders to make it better.

I welcome your comments below.

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