Congratulations to the Election Day winners. So what do Tuesday's results mean for the fiscal outlook?
Think of it this way.
If the country is on an unsustainable fiscal path, which it is, and if continued partisan bickering will not solve this problem, which it won’t, and if divided government has been re-elected, which it has, then the only choices are calamity or compromise.
The Concord Coalition urges compromise.
That must begin immediately as the two parties negotiate a responsible alternative to the “fiscal cliff” – a combination of tax increases and spending cuts that will hit with such suddenness that it could throw the still-fragile economy back into recession.
But they can’t just kick the can down the road -- again. The year-end fiscal cliff is bad, but eventually we will need the longer-term deficit reduction produced by the policies comprising the fiscal cliff. It just needs to be phased-in in a more rational way, as proposed by the bipartisan Simpson-Bowles and Domenici-Rivlin recommendations.
The key is to agree on a process for dealing with the serious and structural imbalance between spending and taxes that, if left on autopilot, will damage the economy, stress the social safety net, diminish our world leadership and leave future generations saddled with a debt burden they did not create and cannot afford.
Solutions will be impossible if both parties retreat to their partisan corners and stubbornly insist that compromise is only something for the other side to do and that any calamity is only the other side’s fault.
It’s long past time to stop such unrealistic nonsense.
There must be spending cuts, including reform of our major entitlement programs such as Medicare, Medicaid and Social Security. And there must be tax reform that broadens the base, maintains progressivity and increases revenues. And all of this must be, and indeed can be, done in a way that enhances economic growth.
Neither side has a monopoly on wisdom for how this should be accomplished, and neither side has a mandate, or the votes, to ram through its own purist agenda.
The status-quo election tells us this: Republicans cannot plausibly argue that the country has rejected President Obama or a Democratic-led Senate. Democrats cannot plausibly argue that House Republican ideas have been rejected. The American people have sent them back to Washington to work together in the national interest. If they don’t find a way to do this, they will betray any implicit mandate they have been given.
So the message to policymakers is this: Do your job.