(AP/Carolyn Kaster)

Mini-deal on "fiscal cliff" in the works?

Expect the president and House Republicans to keep everything as is until March 15 -- when we can do this all over


Robert Reich
November 15, 2012 10:10PM (UTC)
This originally appeared on Robert Reich's blog.

Want to know what’s going to happen to January’s fiscal cliff? Just remember: Political deals move the same way water goes down hill — following the path of least resistance.

Here, the path of least resistance is for congressional Republicans and the President to agree to kick the can down the road – keeping everything as it is (current spending, the Bush tax cut) until a date in the not-too-distant future — say, March 15.

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As a sweetener, Republicans will have to agree to lift the debt ceiling again when a vote is needed to do so, probably in late January.

This mini-deal will give the new Congress and the White House time to craft a “grand bargain” on deficit reduction without going over the fiscal cliff.

It also enables the White House and Democrats to retain their trump card: The Bush tax cuts will automatically expire at the end of the negotiation period (in my example, March 15) unless an agreement is reached. So the top marginal tax rate automatically rises to 39 percent.

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The downside of the mini-deal: Financial markets will remain uncertain about the ultimate deal. That means another several months of Wall Street gyrations. And certain industries – military contractors, drug companies, and other sectors dependent on government spending – may delay expansion or hiring until a grand bargain is struck.

But it’s far better than going over the cliff.


Robert Reich

Robert B. Reich is Chancellor's Professor of Public Policy at the University of California at Berkeley and Senior Fellow at the Blum Center for Developing Economies. He served as Secretary of Labor in the Clinton administration, for which Time Magazine named him one of the ten most effective cabinet secretaries of the twentieth century. He has written 15 books, including the best sellers "Aftershock", "The Work of Nations," and"Beyond Outrage," and, his most recent, "The Common Good." He is also a founding editor of the American Prospect magazine, chairman of Common Cause, a member of the American Academy of Arts and Sciences, and co-creator of the award-winning documentary, "Inequality For All." He's also co-creator of the Netflix original documentary "Saving Capitalism."

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Barack Obama Business Fiscal Cliff Republican Party Robertreich.org U.s. Economy

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