Having concluded one last partisan melodrama — the fight over a stopgap extension of the payroll tax cut — Congress can now put a miserable year of bickering and brinkmanship behind it. Lawmakers may not have much to look forward to, however. The looming presidential election threatens to make legislating in the new year even harder than it’s been in this one, despite the public demand for action to spur economic growth, create more jobs and clean up the federal budget mess. A new set of deadlines at the end of 2012 might lead to a breakthrough in the coming year, but it might not happen until voters have decided whether to keep President Obama in office.
This Congress has a pretty good excuse for its inability to do anything meaningful about the ailing economy. In successive elections, voters installed first a Democratic president and then a House Republican majority, with profoundly different views about what’s causing the doldrums and how to make things better. Obama sees weak demand at the root of the slow recovery, and he has pushed the federal government to pump more dollars into the economy by temporarily spending more. Republicans blame oppressive federal regulations and trillion-dollar federal deficits, and they have sought to slash spending while opposing any tax increases. That’s an ideological chasm, and there’s no real middle ground.
Although they don’t agree on how to do it, both sides recognize that growing the economy is crucial to solving the federal budget problems. Holiday spending surged this year, consumer confidence is rising and new claims for unemployment benefits have fallen notably in recent weeks, all potential signs of accelerating growth. And by preventing an increase in payroll taxes and a reduction in unemployment benefits for at least two months, Congress kept the federal government from tapping the brakes on the expansion.
Uncertainty about how the government will address its enormous deficit, however, remains a damper on growth. Rather than enacting a plan to close the budget gap and manage the growing debt, Congress has been engaged in one long exercise of can-kicking. There’s been no lack of bipartisan proposals for restoring Washington’s fiscal health, including credible plans from the White House’s fiscal commission and the Senate’s “Gang of Six.” The problem, as evidenced by the failure of a deficit-cutting “super committee” handpicked by congressional leaders, is the lack of political will.
Lawmakers have already agreed on spending bills that will fund the government through September. That’s nine months without a threat of a government shutdown, a record for this Congress. After that, though, they may be forced to make some very tough choices about the budget and the economy. The super committee’s failure to come up with a deficit-reduction plan means that automatic cuts in federal programs will start in January 2013 — including defense cuts that the Pentagon has called a “doomsday” scenario. The federal government is expected to reach the limit of its borrowing authority around the same time, setting the stage for another fight over the debt ceiling. And the Bush-era tax cuts are scheduled to expire in December 2012.
The right approach to all three of those issues is to enact a multiyear plan to close the budget gap by overhauling the tax code, slowing the growth of Medicare and other healthcare entitlements, and striking the right balance between defense spending and other priorities. In a promising sign, a handful of senior lawmakers have crossed the partisan divide to tackle some of these issues in a bipartisan way. House Ways and Means Committee Chairman Dave Camp (R-Mich.) and Senate Finance Committee Chairman Max Baucus (D-Mont.) have joined forces in search of a simpler, less loophole-ridden tax code. And House Budget Committee Chairman Paul D. Ryan (R-Wis.) and Sen. Ron Wyden (D-Ore.) proposed a way to inject more competition into Medicare, which could yield innovative ways to hold down costs.
Those seem more like anomalies than trends, however. This Congress’ performance thus far strongly suggests that it will not take the right approach but will instead wait until the last minute to throw together a short-term fix. By that time, the results from the November elections will be in, which should give lawmakers a better idea of whose brand of “change” the country believes in.