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Last week’s presidential debate — the only one devoted solely to the economy and, therefore, the one where the fiscal cliff should have been discussed — provided no guidance whatsoever from either candidate about what he thinks should be done about the big picture.
The only guidance that did emerge was that both candidates said they don’t like some of the fiscal cliff policies, but there was no discussion about options or alternatives.
The economic sectors, industries and specific companies that would be heavily affected by the fiscal cliff spending cuts (think Pentagon contractors, for example) have made it clear that the reductions would be devastating to their bottom lines, number of employees and earnings and have repeatedly said federal programs should not be cut this way.
But as far as I can tell, none has offered an alternative way to achieve the same amount of spending cuts or deficit reduction. They’ve just said “no” and, as a result, greatly complicated the process of preventing the reductions they are so adamantly insisting must be stopped.
On top of everything else, there is a decent chance that Standard & Poor’s and the other rating agencies will consider another downgrade of the credit of the United States if the fiscal cliff goes into effect because it will demonstrate what they said last August they were most worried about: that the U.S. political system has become even more incapable of dealing with federal budget issues. This could happen even though the deficit will fall by a record amount — something the ratings agencies typically think of as positive for a credit rating — if the fiscal cliff tax increases and spending cuts go into effect.
Finally, policymakers should be rushing to the negotiating table now so they can take credit before the election for avoiding what could be the most inexcusable and damaging fiscal policy since the end of the Great Depression when deficit reductions put in place way too early made the economy much worse than it otherwise would have been. The fact that they’re doing the opposite and don’t see preventing severe economic harm as an election plus is, by far, the most bizarre aspect of all.
Stan Collender is a partner at Qorvis Communications and founder of the blog Capital Gains and Games. He is also the author of “The Guide to the Federal Budget.”