The cliff, a term coined by Federal Reserve Chairman Ben Bernanke, includes the expiration of the Bush-era tax cuts for all Americans, sharply lower payments for health-care providers for Medicare patients, and the sequester, which will indiscriminately slash budgets at the Defense Department and non-defense expenditures like social services and education, among other issues.
That hit, the Congressional Budget Office (CBO) estimates, is likely to send the US economy into a recession. And while Congress may do what it does best – put the issue off for some time before scampering home for Christmas break – that route is fraught with peril from bond-ratings agencies threatening to downgrade America’s credit rating should Washington again cop out of its financial responsibilities.
“There’s really been no discussion of the elephant in the room,” says Marc Goldwein, a senior policy director at the Committee for a Responsible Federal Budget, a nonpartisan group that advocates fiscal responsibility. “I’m not sure [the fiscal cliff is] our biggest threat, but it’s our most immediate threat to the economy.”
That lack of discussion could be troublesome for whichever man is elected on Nov. 6, as weighty choices about taxes and spending must be made quickly – and without laying the groundwork or obtaining a mandate from voters for moving a deal through Congress.
“Talking about it, you emphasize, ‘It’s really a problem,’ ” says Douglas Holtz-Eakin, a former CBO director and the chief economic policy adviser for Sen. John McCain’s presidential run in 2008. “The American people need to know it’s really a problem.”
Both Romney and Obama have laid out their plans for handling America’s overall debt and deficit in broad terms, including accepting the claim by bipartisan, blue-ribbon panels that the nation needs to trim its debt by some $4 trillion over the next decade.