It goes without saying that a plunge over the so-called “fiscal cliff” would be a true setback for the nation. Indeed, as Democrats and Republicans say that they’re willing to allow for significant tax hikes and program cuts if the other side doesn’t give, the stakes become ever clearer. Hitting a fragile economy with a one-two punch of less spending and more taxes will send it into a recession at least as deep as the one that sent unemployment skyrocketing in 2008. Additionally, a “recession of choice” resulting from political, rather than economic factors, would forever damage America’s reputation and status as a world leader.
To avoid a calamitous outcome, both sides must compromise on some issues and then unite to maintain non-partisan programs and policies that work to promote growth. This type of compromise will set an optimistic tone going into the next Congress and show America—and the world—that our political system is not broken.
Some painful top-line concessions do need to come first. It’s not realistic to think that the nation can continue to take care of a growing, rapidly aging population without modest tax hikes to pay for it. They’ll have to come and at least a few Republicans will have to bite the bullet on that. Democrats, on the other hand, will have to agree to spending cuts in more than a few areas. Fixing what isn’t working in various entitlement programs (while also making a point to preserve what is), will be top of mind next year. And both policies will extract a political price for policymakers from both sides.
But the haggling over the fiscal cliff also presents a very real opportunity for the two parties to come together around common sense policies that will move the nation forward. A few of these already have broad support: for example, extending the payroll tax holiday that puts more money in workers’ pockets is consistent with both the Republican Party’s low-tax commitments and the Democrats’ focus on providing economic opportunity for low-income Americans. Continuing investment in infrastructure and education also makes sense even as we consider deep spending cuts in other areas.
And the biggest chunk of federal spending–the more than $1 trillion that governments at all levels spend on the Medicare, Medicaid, and Social Security programs—seems particularly important to address. Here, indeed, we already have a working model for a bipartisan compromise: the Medicare Part D drug benefit that helps senior citizens afford the medicines they need. Conservatives have a lot to like about it because it promotes free-market competition and consumer choice (more than 1,000 different plan options exist) and, unlike every other major social program ever created, actually costs less than number crunchers first forecast it would.
On the other hand, progressives have reason to celebrate because the drug benefit provides solid coverage to every senior citizen who wants it (more than 90 percent of seniors in a recent survey expressed satisfaction with their coverage). It’s a near perfect example of change that both parties ought to build on, which is why there’s ample reason to worry about proposals to gut the program by imposing new fees (misleadingly called “rebates”) on companies that take part. These fees could end the competitive elements that have made the program successful so far, drive up premiums for beneficiaries, and limit new drug innovation. This is exactly the sort of thing that politicians need to avoid.
Quite simply, politicians need to make a deal on the fiscal cliff. Not just any deal but, rather, one that builds on what works and discards what doesn’t. Whatever happens, there will be some pain and compromise, not only within political parties, but for the American electorate. However, if Congress chooses a non-partisan, pro-growth path, it can use the current fiscal crisis to set a positive tone and move the nation in the right direction.