The CBO analysts warn that the delay must be temporary. Postponing the reckoning longer will lead to “a surge in federal debt” and “raise the risk of a fiscal crisis.” So, to reassure skittish investors and bring along fiscal conservatives, the pump-priming may have to have an end date. It may not be possible to waive all of the first two years of sequestration without offering some kind of alternative brake on spending or entitlement reforms.
How do the Bush-era tax cuts as applied to the wealthy factor into this?
Continuing all the expiring tax cuts would boost GDP by about 1.5 percent in 2013 and result in about 1.8 million new jobs, the CBO says. Continuing all the tax cuts except for the high-end rates on couples earning more than $250,000 a year would pare that growth to about 1.25 percent and cost the country 200,000 jobs in 2013.
So Democrats may want to be flexible. Republicans might see the wisdom of cutting a quick deal if Obama agrees to keep the high-end tax rates below the Clinton-era top rate of 39.6 percent; or to accept a higher threshold of $500,000 or $1 million. The GOP won’t and shouldn’t "fall on its sword to defend a bunch of millionaires, half of whom voted Democratic and half of whom live in Hollywood," in the now-famous words of William Kristol, editor of The Weekly Standard.
Obama knows that Boehner and McConnell have their own trump cards. The White House will need another extension of the debt ceiling in the first weeks of 2013, and more in the years to follow. Obama could benefit from a ratcheting back of Republican hostility toward his health care plan as the rollout of the Affordable Care Act continues. There are hints of bipartisan progress on Capitol Hill on immigration and tax reform.
And Obama has his legacy to consider. Congress can’t move on to other crucial needs until it gets the country’s finances fixed, said Sen. Michael Bennet, D-Colo., a member of the Gang of Eight senators hoping to lead their colleagues to a bipartisan deal. But once that’s accomplished, success could build upon success. You could "add real velocity," he said.
It’s not the time for a prolonged confrontation, such as the showdown over the debt ceiling in the summer of 2011.
Kicking the pain down the road takes a page not from Conan but from St. Augustine: "Da mihi castitatem et continentiam, sed noli modo." Give me chastity and continence, but not yet.
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