An Easy Fix to the "Fiscal Cliff"

by John M. Curtis
(310) 204-8700

Copyright Dec. 2, 2012
All Rights Reserved.                                         

       Given Washington’s partisan divide and the stranglehold Party boss Grover Norquist has on the Republican Party, President Barack Obama and House Speaker John Boehner (R-Ohio) have to step up for the good of the country.  While it’s inexcusable that Republicans don’t cut Barack more slack after his landslide win Nov. 6, both sides must face the reality of Washington’s divided politics.  White House officials must think outside the box to satisfy disgruntled Republicans, still continuing a post-election food fight, pontificating about what’s best for the country.  Since Obama won the election handily, the GOP should defer to the president’s judgment on how to fix the economy, not reciting old bromides from Reaganomics.  Since Boehner continues to make the point about small, self-employed businesses, the White House should consider making some concessions.

            Most economists believe that small, independently-owned businesses are the backbone of the U.S. economy, supplying more jobs than local, state and federal government or, for that matter, small, medium and large-cap publicly-traded corporations.  Since GOP negotiators continue to fight for small businesses, Treasury Secretary Tim Geithner and Barack’s economic team should exempt that group from proposed tax hikes on small businesses earning over $250,000.  As long as self-employed individuals have at least one employee, they should enjoy tax preferences, including a continuation of the same rates under former President George W. Bush.  “I actually think that we’re gonna get there.  I mean, you know, just inevitably gonna be a little political theater in this context,” said Geithner, hinting at more concessions and compromises to follow.

            Facing the so-called “fiscal cliff” Jan. 1, 2013, where automatic government spending cuts and expiring Bush-era tax cuts end, both parties have to stop the gridlock to save the U.S. economy.  Limping along since the Great Recession of 2007-08, where the nation’s biggest financial institutions ran out of cash, the economy’s GDP remains at a sluggish one-and-a-half percent.  Most economists think if consumers are hit with tax increases and government spending cuts, the economy could double-dip into recession.  With Obama’s “Affordable Care Act” starting in 2014, costing the government about $1 trillion over 10 years, any recession could drive the nation’s $1.2 trillion budget deficit through the roof.  Lawmakers need to stop the partisan wrangling and get on the same page.  Exempting independently owned small businesses earning over $250,000 would be a step in the right direction.

            Calling the current “fiscal cliff” negotiations a “stalemate,” Boehner wants the White House to compromise on tax hikes to self-employed businesses.  What Boehner and his group of Tea Party-leaning, budget-slashing Republicans don’t get is that the president is not going to let “fiscal cliff” negotiations morph into entitlement reform.  When Barack won a decisive reelection Nov. 6, a majority of Americans voted to keep entitlements, especially Medicare, Medicaid and Social Security, intact.  During the first round of “fiscal cliff” negotiations, Republicans wanted to put Medicare, Medicaid and Social Security reform on the table.  While there’s a time and place for entitlement reform, it shouldn’t be linked to “fiscal cliff” discussions.  Former GOP nominee Mitt Romney and his running mate Rep. Paul Ryan (R-Wis) presented their case for entitlement reform and lost the election.

            Speaking on ABC’s “This Week” with George Stephanopolous, Geithner said the entitlement reform was not on the table in “fiscal cliff” discussions.  “Look, there’s a huge amount at stake here in this economy, George.  And there’s just no reason 98% of Americans have to see their taxes go up because some members of Congress on the Republican side want to block tax increases for 2 percent of the wealthiest Americans. Remember, those tax rates, those tax cuts, cost a trillion dollars over 10 years,” said Geithner, still not addressing GOP concerns to protect small businesses.  Though slated to leave Obama’s Cabinet sometime after the inauguration Jan. 20, 2013, Geithner remains Obama point man on “fiscal cliff” discussions.  Reminding Republicans with how they lost the election doesn’t seem to invite the serious dialogue needed to find a fix for the “fiscal cliff” by Jan. 1.

            With the “fiscal cliff” only four short weeks away, Boehner and the White House have to stop posturing and get back to work.  There’s plenty of common ground when it comes to closing tax loopholes for wealthy taxpayers.  White House officials need to heed GOP concerns about small businesses, including the idea of exempting self-employed small businesses with more than one employee from the slated tax hikes.  Boehner must show some leadership and restrain his caucus from imposing entitlement reform on the current “fiscal cliff” negotiations.  “We think we have a very good plan, a very good mix of tax reforms that raise a modest amount of revenues on the wealthiest 2 percent of Americans . . .” said Geithner, giving little to the GOP to make a deal.  If the White House heeds GOP concerns about small businesses, then there’s a good chance they can nail down the “fiscal cliff” by year’s end.

 John M. Curtis writes politically neutral commentary analyzing spin in national and global news.  He's editor of OnlineColumnist.com.and author of Dodging the Bullet and Operation Charisma.

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