WASHINGTON: President Barack Obama and leaders of the lame-duck Congress may be just weeks away from shaking hands on a deal to avert the dreaded “fiscal cliff.” So it’s natural to wonder: If they announce a bipartisan package promising to curb mushrooming federal deficits, will it be real?
Both sides have struck cooperative tones since Obama’s re-election. Even so, he and House Speaker John Boehner, R-West Chester, the GOP’s pivotal bargainer, have spent most of the past two years in an acrid political climate in which both sides have fought stubbornly to protect their constituencies.
Obama and top lawmakers could produce an agreement that takes a serious bite out of the government’s growing $16 trillion pile of debt and puts it on a true downward trajectory.
Or they might reach an accord heading off massive tax increases and spending cuts that begin to bite in January — that’s the fiscal cliff — while appearing to be getting tough on deficits through painful savings deferred until years from now, when their successors might revoke or dilute them.
Historically, Congress and presidents have proven themselves capable of either. So before bargainers concoct a product, and assuming they can, here’s a checklist of how to assess their work:
Overall deficit cuts
The House and Senate have four weeks until Christmas. Their leaders and the president want a deal before then. Bargainers are shooting for a framework setting future debt-reduction targets, with detailed tax and spending changes to be approved next year but possibly some initial savings enacted immediately.
Obama has suggested 10-year savings totaling around $4.4 trillion.
Passing a framework next month that sets deficit-cutting targets for each of the next 10 years would be seen as a sign of seriousness.
A deal that specifies where revenue would come from would lay important groundwork for next year’s follow-up bill enacting actual changes in tax laws.
The biggest clash has been over whether to raise income tax rates on earnings over $200,000 annually for individuals, $250,000 for families. Obama wants to let them rise next year to a top rate of 39.6 percent but has suggested he would compromise. Boehner and other Republicans oppose any increase above today’s top marginal rate of 35 percent. Instead, they advocate lower rates and eliminating or reducing unspecified deductions and tax credits.
A serious agreement should specify how much savings would come from entitlements, meaning those big, costly benefit programs such as Social Security and Medicare. It also should say how much would come from discretionary spending, which covers federal agency budgets for everything from the military and national parks to food safety inspections and weather forecasts.
Why the need for specificity?
Because spending for entitlements occurs automatically, accounts for nearly two-thirds of federal spending and is the fastest growing part of the budget. Discretionary spending has been shackled by past budget deals and, according to the nonpartisan Congressional Budget Office, is moving toward falling below 6 percent the size of the economy by 2022, the lowest level in at least 50 years.
A sincere effort to control expenditures would focus on entitlements, the true source of the government’s spending problem.