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Three news items last week exemplified the danger Americans face if Congress doesn't act before January 1 to prevent a financial disaster. Yet, our lawmakers decided to take the month off and campaign for reelection.
The first item was a Washington Post story titled, "Battle Intensifies over Sequestration: Spending Cuts Set for January." It highlighted the coming battle over deep cuts in defense and non-defense budgets if Congress does nothing. Another story, in the New York Times, carried the headline, "Partisan Impasse Drives Industry to Cut Spending: Fears of Fiscal Cliff." Finally, the Charlottesville Daily Progress ran an Associated Press report titled, "Is Social Security Still a Good Deal?" It showed that workers retiring today will not get back in Social Security payments as much as they paid in. {All published August 6}
My conclusion after reading these alarming articles was that the danger is urgent, while Congress plays possum with the economy by putting off action until after the November elections. American business and industrial leaders are not willing to invest or hire more workers because of uncertainty over whether and how much their taxes will increase. The recent rise in unemployment and continuing concerns about Europe's financial problems reflect deep skepticism about future economic growth.
Equally worrisome, while Americans nearing retirement age are reminded that they may not have the money in retirement they expected, younger workers know that their retirement age will need to rise and their benefits be limited in order to prevent bankruptcy in the Social Security System.
Those who tend to be optimistic think that, after the elections, Congress will agree on a grand compromise that raises taxes, curtails entitlements, especially the ballooning costs of Medicare and Medicaid, and simplifies the archaic federal tax code. Their rosy outlook is based on an assumption that a lame-duck Congress will have less reason to play politics with taxes and entitlements and instead will consider the health of the economy their top priority.
Pessimists doubt that members of the House and Senate, many of whom will not return in January, will be in any mood to concede on crucial issues, such as tax increases for all, reduction in medical care for the elderly, and elimination of tax breaks and subsidies for favorite constituents. Congress will have less than two months, they argue, to enact legislation it has declined to do for a decade, or come to grips with the reality that America lives far beyond its means and must both cut spending and raise taxes.
The Department of Defense and a host of industries dependent on defense contracts have sounded the alarm on what will happen if Congress fails to act to stop sequestration in January 2013. Defense secretary Leon Panetta and the military chiefs warn that major cuts will dramatically shrink the size of all four armed services, because cuts will be across the board and not targeted at specific weapons systems, such as the Air Force's hugely expensive F-35 joint services fighter. The Pentagon would absorb nearly a half trillion dollars in additional budget cuts if Congress doesn't change the law.
I find myself agreeing with skeptics who doubt that Congress will suddenly, after the election, start thinking like statesmen and caring about the country's economic well-being. It will be hard for members to cease protecting federal programs favored by their supporters and major fund raisers. A lame-duck session may agree on a few incremental changes, but not major ones like entitlement reform and substantial tax increases.
Who is elected president on November 6 is a major factor. If Barack Obama is reelected, he may be obliged, reluctantly, to reach accommodation with Republicans in the House, who will likely retain the majority. He could agree on major cuts to entitlement spending in return for what Republicans call "revenue increases."
If Mitt Romney wins, even though he wouldn't take office until January 20, House Republicans are less likely to agree to large tax increases and will try to shield the defense budget from sequestration. Democrats would resist,. and stalemate could ensue.
What is ironic, and deeply troubling, are calls by members of Congress and some newspapers for the United States to "show leadership" in foreign policy, on Syria, Iran, and South China Sea. For example, Senators John McCain, Joseph Lieberman, and Lindsey Graham continue to beat the drums for U.S. intervention in Syria to prevent a civil war. ("The Risks of Inaction in Syria," Washington Post, August 6).
With the country facing a "fiscal cliff" at the end of the year, America isn't ready for new interventions abroad. If the next president and a new Congress can reach accommodation to avoid the looming fiscal Dunkirk, American foreign policy may be more robust in 2013 and beyond. For now, Washington's first order of business is to get this nation's financial house in order, and time is running short.
File last modified on Wednesday, 08-AUG-2012 11:45 PM EST