Negotiations over the year-end “fiscal cliff” and federal budget reform continued early this week, with President Obama and House Speaker John Boehner meeting Sunday afternoon but offering the public no details of the discussion.
In the last two weeks the administration and House Republican leaders have exchanged formal proposals, with each side complaining that the other was recycling old and unbalanced proposals. The White House and Boehner’s office, however, have said the “lines of communication remain open.”
Many economists and others say the fiscal cliff – a combination of expiring tax breaks and poorly designed “automatic” spending cuts – could put the country back in a recession if these policies are all allowed to take effect as currently scheduled.
On Sunday Christine Lagarde, the managing director of the International Monetary Fund, added her voice to these warnings. She said the possible failure of Washington’s fiscal negotiations was the most significant threat facing the U.S. economy and could result in “zero growth.” She called for a balanced agreement in Washington that would include both spending cuts and revenue increases.
The Concord Coalition urges elected officials in both parties to work together to quickly replace the cliff with an immediate but more responsible “down payment” on deficit reduction, together with a framework for more comprehensive, long-term budget reform.
Ideally, the two parties will also find a way to avoid another protracted battle over the federal debt limit, which will need to be raised in the near future. A willingness to compromise is essential for both sides, since neither party has the ability to force through its own agenda.
LaGarde: ‘Zero’ U.S. Growth Without a Deal
CBO: Federal Debt and the Statutory Limit
GAO: The Government’s Long-Term Fiscal Outlook (Fall Update)