Conflicting Signals on Budget Talks

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Washington officials are sending conflicting signals over talks between the White House and congressional leaders to avoid the fiscal cliff while also moving the country forward on long-term deficit-reduction.

President Obama talked by phone with House Speaker John Boehner and Senate Majority Leader Harry Reid over the weekend, and White House Press Secretary Jay Carney said Monday that administration officials remained “hopeful and optimistic.”

It is clear, however, that substantial differences between the two parties remain over some critical issues. People in both parties continue to point to areas of disagreement, and Senate Minority Leader Mitch McConnell said Monday that the talks were at “an impasse.”

Earlier this month, Obama and congressional leaders held an initial budget meeting at the White House that produced promising signs afterwards, with an apparent consensus that both spending cuts and tax increases need to be part of an agreement. White House and congressional staff members have met since then to consider options for further high-level discussions.

The fiscal cliff is a year-end combination of spending cuts and expiring tax breaks under current law that, if they were allowed to simultaneously take effect, would likely throw the U.S. economy into another recession.

Elected officials and their staffs have discussed a two-step process that would replace the fiscal cliff with a “down payment” on deficit-reduction while establishing a framework for setting a more responsible long-term budget path. Concord Coalition Executive Director Robert L. Bixby says such an approach, together with a credible back-up mechanism in case Congress later fails to act, could work well.

Economists, business executives, state and local leaders, and many others have urged Congress and the White House to act quickly on the fiscal cliff to avoid stoking public fears of another recession. But Concord and other advocates of fiscal reform also warn that this immediate crisis should not be used as an excuse to further postpone dealing with the long-term structural imbalances in the federal budget.

Bipartisan cooperation and compromise remain essential for constructive action. This month’s elections, once again, left neither party with the political strength to simply push through its own agenda.

External links:
A Good Start
Election Winners Must Choose Between Fiscal Calamity and Compromise

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