At first blush, Peter Welch’s idea might sound like brinksmanship, but the congressman may actually have one the most practical solutions to the “fiscal cliff” proposed so far.
Welch, a Democrat from Windsor County, has spent the last couple of days telling news outlets that Democrats should be willing to go over the cliff if that is what it takes to get a good deal on taxes and spending.
“It may be necessary,” Welch told The Times Argus on Wednesday afternoon. “The prize is a responsible deal on the debt.“
The “fiscal cliff” is the combination of automatic tax increases and spending cuts Congress has passed over the last several years that is set to kick in at the start of the new year, Jan. 1, 2013. While the crisis is being called a “fiscal cliff,” it is more like a policy slope in which implications are staggered over time. Unlike the debt ceiling crisis of a year ago, this deadline is less rigid, giving Congress time to reach reasonable solutions if the Dec. 31 date lapses.
But the economic implications still are notable — and potentially historic.
According to the Huffington Post, economists have warned that ending all the Bush tax cuts at the same time as the alternative minimum tax is set to haul in many more people — and the same time as Congress’ decade-long budget cut of some $1 trillion will begin — could push the economy into recession again. It’s a one-two punch of taking government money out of the economy while taking money out of consumers’ pockets.
And while all sides seem to agree the tax system needs to be reformed and that spending must be controlled, the parties are miles apart on how. Democrats favor as part of their solution letting the Bush-era tax cuts expire only for income above $250,000, leaving the cuts in place for about 98 percent of the country.
Ignoring the deadline is not ideal; the pressure to resolve the crisis mounts with every day.
Welch is arguing that if a deal between President Barack Obama, Republican Speaker John Boehner, of Ohio, and Senate Majority Leader Harry Reid, a Nevada Democrat, falls through before the Dec. 31 deadline, Congress might dodge its responsibility and postpone the decision, or let the date lapse, which would force the sides to come up with a meaningful solution.
“Kicking the can down the road” makes Congress look dysfunctional and again mired in brinksmanship, Welch said.
On the other hand, forcing a deal after Dec. 31, with the pressure really building, could yield real solutions on the debt.
“(Democrats) should not blink if blinking means that we pretend that there isn’t a serious debt issue that we have to address and that revenues have to exempted,” he told The Times Argus. “We’ve blinked before.”
With the leverage they have from Obama’s election to a second term, and the sound beating Republicans and their agenda took Nov. 6, Democrats may not have to blink this time around.
“I’m a skeptic (the president and the leadership) will be able to reach an agreement,” Welch cautioned. “But it doesn’t matter if it’s January 1 or January 10, as long as the deal is a sound one.”
And he may be right.
Boehner has said repeatedly that the GOP is open to revenue — but not by raising taxes on the wealthy. (That has been the mantra through Obama’s first term and the campaign.) Boehner argues growth would happen if Congress cuts taxes and closes loopholes.
But until Boehner can demonstrate where that money would come from, there is no need for blinking by Democrats.
“(When we get a deal) is less important than what we get is solid and substantial.”
Now, with a mandate from the nation’s voters to “work it out together and resolve these issues,” the conditions in Washington, D.C., are right for resolution.
Welch is absolutely correct even if his argument sounds dramatic: Punting the issue would send the wrong message to financial markets and the American people.
We need confidence in our elected officials to make the decisions that move us beyond brinksmanship, posturing and stalemates.
This first crisis, despite its daunting name, could prove to be the first climb toward recovery — both politically and economically.
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