Congress and President Obama shouldn’t settle for some temporary fix to the fiscal cliff. They need to go big and agree on significant spending cuts, entitlement reforms and higher taxes on the wealthy.
They shouldn’t squander this opportunity to make a real difference to our nation’s financial future.
Obama and GOP leaders are trying to avert deep budget cuts to defense and other key programs and the expiration of the Bush-era tax cuts that are scheduled to happen Jan. 1. So far, there has been more public posturing than serious negotiation.
Obama is insisting that tax rates increase on those making $250,000 or more a year. House Speaker John Boehner, R-Ohio, and most other Republicans are resisting any rate increase and calling for spending cuts and reforms of Social Security, Medicare and Medicaid.
The reality is that all of the above are needed. The nation’s budget hole is so deep that it can’t realistically be filled only by spending cuts or tax increases.
Likewise, the main drivers of long-term deficits are the entitlement programs. As more baby boomers retire, the costs of these programs will soar, causing the national debt to skyrocket.
Because the economy is still fragile, Congress and the president have to be careful how they craft a budget agreement. The plan likely would need to be phased in over several years in order to lessen the shock – similar to the strategy proposed two years ago by Obama’s deficit-reduction commission.
But first they have to reach a deal. And that will require compromise.
GOP lawmakers need to agree to higher taxes on the wealthy (whether from a rate increase or by eliminating or capping deductions). Obama needs to support entitlement reforms (such as means-testing benefits and raising the retirement age).
Beyond the immediate budget concerns, the fiscal-cliff debate is a test of whether the United States can still govern itself.
The reason the U.S. credit rating was downgraded last year was not because our financial problems can’t be solved. It was because the financial markets doubted the ability of our political leaders to reach agreements.
If our leaders just kick this issue down the road again, they will confirm those concerns. Instead, they need to send a strong message to the markets, the American public (which also is losing faith) and the rest of the world that this country can still come together and make difficult decisions.
The United States is not Greece. We still have the ability and resources to turn our fiscal ship and avoid disaster. But we must demonstrate the political will.
Do it now.
For the editorial board, Phillip Brownlee