5 Scenarios for the Fiscal Cliff
Posted at noon on Nov. 13, 2012
Politico presents the five possible ways that President Obama and Congress can resolve the “fiscal cliff” in the lame-duck session.
“1. Go over the cliff… There just isn’t a lot of time before Jan. 1. Congress returns this week but then leaves town for Thanksgiving. After returning from that break, lawmakers will have only four weeks to strike a compromise on issues that have confounded the parties for years.”
“2. A big deal. This is what Boehner wants: a framework that would force Congress to spend 2013 reforming the Tax Code and stabilizing entitlement programs… A grand bargain is also Obama’s first choice. It would allow him to sweep away these major issues at the start of his second term, get the economy moving again and focus on other issues. But it won’t be easy. Developing a framework for a big deal would mean the two parties would have to agree on how much revenue tax reform should generate, the rate structure, which entitlements would be tweaked and a deadline for doing so.”
“3. Tax-free strategy… Democrats could agree to the Republican demands to lift the sequester for a year if it is paid for in a balanced way. In return, Democrats would seek some kind of tax break along the lines of the payroll tax cut, which expires Dec. 31.”
“4. Buy more time… Congress has been doing this for years with the federal budget. So don’t be surprised if a growing number of lawmakers call for a six-month or yearlong extension of the status quo to give them more time to deal with it.”
“5. Buy more time — but with a down payment… Congress buys itself a few more months or a year but couples it with a small package of spending cuts and revenue increases to signal to Wall Street that it isn’t simply avoiding tough choices.”