Obama Fiscal Cliff Proposal is a Non-Starter
With less than a month to go before the fiscal cliff deadline, there is no time for political posturing or rigid demands. Yet President Obama's opening offer in the fiscal cliff negotiations is so extreme and irresponsible that it has significantly undermined the process before discussions have even gotten off the ground.
The plan is so unserious it's hard to choose the most outrageous component. But perhaps the most emblematic is this: The plan calls for $50 billion in new stimulus spending. In case the president has forgotten, the fiscal cliff was created through failure to deal with our $16 trillion national debt. Spending cuts must be the fundamental feature of any fiscal cliff plan, but they are an afterthought at best in Obama's plan. The president's proposal calls for about $1.6 trillion in new taxes, including $960 billion in immediate tax rate increases followed by $600 billion in additional tax revenues through adjustments to the tax code. Only next year, after the tax increases are in place, would the Democratic plan get around to considering an inadequate $400 billion in spending cuts through entitlement reform.
While the lack of spending cuts in the plan is grossly negligent, the president's debt ceiling proposal is downright dangerous. Rather than the current process requiring Congress to vote on the debt ceiling each time an increase is requested, President Obama would designate all debt ceiling authority to the White House. Under his plan, the president could raise the debt ceiling at any time, and only a two-thirds disapproval vote from Congress could reverse the unilateral decision. Automatic debt ceiling increases would be a terrible policy for a nation on the verge of a debt crisis. The last time Congress voted to raise the debt ceiling in August 2011, the process was protracted, but it concluded with an agreement to cut $2 trillion in spending. Although a portion of those spending cuts remain an unresolved component of the fiscal cliff, this vital step toward debt reduction would never have happened if the president had sole authority to raise the debt ceiling. As I stated in remarks quoted by The Weekly Standard, "I wouldn’t give Ronald Reagan that kind of power, let alone Barack Obama," who has generated more debt than any president in history.
The stock market reaction to the president's plan was swift and alarming. The Dow Jones Industrial Average dropped nearly 60 points in eight minutes the afternoon Treasury Secretary Timothy Geithner delivered the plan to Capitol Hill.
With a divided government, neither party can expect to achieve 100 percent of their policy objectives in the final fiscal cliff agreement. Congressional Republicans acknowledged as much in offering an initial proposal that would allow for increased revenue via tax reform. President Obama's plan contains no concessions at all to either the duly elected House Republican majority or the nearly 50 percent of the American electorate that voted against his policies. The president and his party need to go back to the drawing board to develop a reasonable plan with a balance of tax reform, spending cuts, and entitlement reform.