The fiscal cliff is drawing closer with less than 3 weeks before the deadline. However, there is still time to get a practical deal, if policymakers follow some basic principles and get past some of the myths floating around.
Simply kicking the can down the road and delaying the fiscal cliff isn’t sufficient. The cliff must ultimately be replaced by a comprehensive, long-term plan that reduces the deficit in a smart way. While time is running short to enact such a plan by the end of the year, it is possible to put in place a two-stage process that ensures a full-scale package comes to fruition.
A new policy brief from our affiliated organization, the Committee for a Responsible Federal Budget (CRFB), offers up guiding principles for developing a sound two-stage process. Those principles are:
- Agree to a big framework
- Put in place a credible process to achieve the framework
- Address the fiscal cliff
- Enact a downpayment
Read the brief here for more on what should come out of the fiscal cliff negotiations.
Finding a smart solution to the fiscal cliff also requires getting the facts straight. To that end, CRFB tackled the most popular myths about the cliff.
Think the fiscal cliff spares the most disadvantaged? How about that the plans to replace the fiscal cliff would be worse than the cliff itself? Or that anyone who believes in reducing the deficit should support going over the fiscal cliff? All false.
Contrary to some claims, the fiscal cliff does not spare the poor. In fact, CRFB points out that, “The poor would see a large tax increase, another recession and rising unemployment made worse by the expiration of extended unemployment benefits as a part of the cliff, and cuts to many income security and education programs as a part of sequestration.”
On the other hand, plans like Simpson-Bowles and Domenici-Rivlin fare better at protecting the most vulnerable. Their tax policies are more progressive than the fiscal cliff and they are more conducive to economic growth.
Finally, some have argued that if you are sincere about reducing the deficit you must support going over the fiscal cliff. This is akin to saying that if you like wine then you have to like all wine, even the stuff in boxes. There are better ways to reduce the deficit than going over the cliff. A smarter approach is to phase in deficit reduction over time with thoughtful savings as opposed to the abrupt, across-the-board spending cuts and tax increases of the fiscal cliff.
Getting a solid fiscal cliff deal is achievable. It just will require political will on both sides to get it done.
For more in-depth myth busting and for more information on the fiscal cliff, visit CRFB’s Fiscal Cliff Resource Page.