Editorial: Not-So-Grand Bargain; The Tough Decisions Remain
The 113th Congress is scheduled to convene at noon today, and not a moment too soon. The not-so-grand bargain approved by the 112th Congress as it mercifully expired this week left almost all major fiscal issues unaddressed, so there’s a lot to do.
Yes, the agreement, negotiated by the White House and Senate Republicans to avoid the so-called fiscal cliff of automatic tax increases and spending cuts, does establish a couple of important points. One is that contrary to what many Republicans apparently regard as a law of physics, it is possible for taxes to go up as well as down. By way of perspective, this marks the first time in two decades that income taxes will rise.
The second is that the wealthiest 2 percent of American households are rightly being asked to bear more of the national burden at a time when their income has soared in comparison with that of middle- and working-class families. The income tax increases will fall almost exclusively on households making at least half a million dollars, according to an analysis by the nonpartisan Tax Policy Center, which estimates that the top 1 percent of households will see an average increase in income taxes this year of $62,000.
Current Republican orthodoxy notwithstanding, however, this was the easy part. The deal includes a permanent extension of almost all of the Bush-era tax cuts, which, according to the White House, means that 98 percent of households and 97 percent of small businesses will see no income tax increase (although payroll taxes for Social Security will return to their previous level after a two-year reduction). A generation ago, Republican lawmakers would have been dancing in the streets over that kind of a deal, instead of opposing it overwhelmingly in the House.
In any case, the failure to achieve the grand bargain dreamed about by President Obama and House Speaker John A. Boehner seems to guarantee that the new Congress will be living on the edge, much as its predecessor did. The deal approved this week did not tackle overhauling the individual or corporate tax codes; figuring out what to do about Medicare costs; or determining what, if any, changes need to be made to Social Security. Moreover it booted down the road for two months the automatic spending cuts in domestic programs and defense that were scheduled to take effect Jan. 1.
As it now appears, this sets the stage for several more rounds of rancorous and perhaps inconclusive wrangling, beginning with raising the debt ceiling as soon as February and followed in March by trying to reach a short-term spending agreement. And when the two months expire, the nation can look forward to another exchange of recriminations over spending cuts versus revenue increases.
It seems likely that given the partisan divide in Washington, the prospect of reaching a broad agreement on fiscal policy last year was always remote. And in theory we have nothing against incrementalism. But to a large extent, these issues are all interrelated in a way that makes it hard to resolve one of them intelligently without knowing how that resolution will affect the others. We hope Obama and congressional leaders will keep pushing for that grand bargain, which would be a genuinely big deal.