President Obama made a campaign-style trip to Pennsylvania yesterday, touting his initial offer in the so-called “fiscal cliff” negotiations with Congress: It’s a plan heavy on tax increases and light on spending cuts — and thus probably not to be taken totally at face value.
The White House proposes tax hikes of $1.6 trillion over 10 years on high-level income, capital gains and dividends plus limiting tax deductions — with a mere $400 billion in vague spending cuts to come at some later time.
The outline also includes $50 billion in new infrastructure spending and removing Congress’ role in raising the debt limit.
Republicans were having nothing to do with it.
No surprise.
This is all part of a high-stakes poker game — though one that places the entire US economy at risk.
If nothing is done by Dec. 31 — i.e., fiscal-cliff D-Day — the current-law combination of across-the-board income-tax hikes and dramatic, defense-heavy spending cuts will slam the brakes on an already slow recovery, likely generating another recession.
Look for much drama — and ultimately a “settlement,” of sorts.
It’s the nature of that deal that matters.
Any bargain that’s not predicated on policies that encourage job creation and economic growth could indeed be catastrophic.
A deal that relies too much on either higher taxes or spending cuts will also have a deleterious impact on the economy.
More significant, it will do nothing to alleviate unemployment that still lingers near an unacceptable 8 percent.
Fighting over just taxes and spending loses sight of the primary driver of a robust economy — growth, and the jobs that it produces.
More people working means more people making money, which in turn generates tax revenue — and less government spending in the form of benefits.
That formula worked during both the Reagan and Clinton recoveries.
With the 2012 campaign blessedly over, let’s hope Obama and congressional leaders keep that history in mind.