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No Reason To Panic Over Cliff, Sequestration — Yet

Dec. 14, 2012 - 01:38PM   |  
By JOHN T. BENNETT   |   Comments
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President Barack Obama and U.S. congressional leaders have yet to strike a deal to avoid fiscal chaos and deep military cuts, but there’s little reason to panic. Yet.

There was, for the first time, noticeable tension on Capitol Hill last week among congressional leaders and rank-and-file members. Criticism from lawmakers about the other political party’s demands were sharper, as were the stances of those doing the criticizing.

“There can’t be a grand deal between now and the end of the year ... when you can’t take the first clear step that the Republicans refuse to take,” Rep. Sander Levin, D-Mich., told reporters Dec. 13, referring to Democrats’ desire to raise revenue by upping top-tier tax rates.

Levin insisted congressional Democrats are “not overplaying our hand,” pointing to the November election that handed Obama a second term and saw Democrats gain seats in both the House and Senate.

Republican leaders, so far, are standing firm against that notion while calling for massive federal spending cuts.

“The president wants to pretend spending isn’t the problem. That’s why we don’t have an agreement,” House Speaker John Boehner, R-Ohio, told reporters the same day. “Unfortunately, the White House is so unserious about cutting spending that it appears willing to slow-walk our economy right up to — and over — the fiscal cliff.”

But all the fervor has merely constituted the fiscal cliff undercard. The main event has yet to start. Here are three reasons not to panic. Yet.

Congress Needs Deadlines

In many regards, the cliff-sequestration clock only began ticking this week. A quick review of recent history shows U.S. lawmakers lack the ability to do big things until the 11th hour.

During a 2011 government shutdown threat and talks to craft the Budget Control Act that set up sequestration, Congress acted only as deadlines approached. The same scenario is playing out here because bitter partisanship mandates that neither side give too much ground too soon.

“They absolutely need a deadline,” said Larry Korb of the Center for American Progress. “That’s why they put it into the Budget Control Act. The idea was everyone would realize we can’t do this because of the cuts to defense and domestic programs.”

But make no mistake, the clock has officially started — and congressional leaders hear it.

Obama and top lawmakers need to strike a deal in “the next couple days” if they hope to avoid fiscal chaos and deep cuts to Pentagon spending, House Minority Leader Nancy Pelosi told reporters Dec. 13.

The California Democrat told reporters a deal must be in place by “early [next] week” if Washington intends to avoid the Dec. 31 deadline for passing legislation to avoid the so-called fiscal cliff, which includes identical $500 billion cuts to planned defense and domestic spending.

“We don’t know if we’ll be home for Hanukkah or Christmas,” Pelosi said.

No Panic

For the first time since the August 2011 passage of the Budget Control Act, last week one could detect a collective sense of urgency on both sides of the Capitol campus. And it grew as Tuesday became Wednesday and then Thursday.

But tension and urgency shouldn’t be mistaken for panic. Pelosi was clearly frustrated during her weekly session with reporters but gave no indication talks were at an impasse.

“We are coming down to the wire,” she acknowledged. But she stoically added it is time for Obama and congressional leaders to get together and “politically engineer a solution.”

Some members adopted a business-as-usual aura.

“I’m not panicking,” House Armed Services Committee member Rick Larsen, D-Wash., told Defense News. “And I’m not going anywhere.”

Asked if there is a date at which the defense sector — and the entire nation — should press the panic button, Larsen replied, “Some members say it’s next Friday [Dec. 21], but I think what will happen is we’ll blow right past that and go into Christmas to get something done.”

Lawmakers and congressional sources said that “something” most likely will be a so-called “framework deal” that extends some tax cuts for the middle class, delays the defense and domestic sequester cuts, and sets the table for a big fiscal deal by next summer.

To that end, Pelosi called for the negotiators to pass a smaller fiscal package this month, then tackle big issues such as reforming the federal tax code and cutting entitlement programs next year.

Not every member interviewed, however, agreed with Larsen.

“I think the date to panic is Monday [Dec. 17],” said Sen. Barbara Mikulski, D-Md. “We’ve desperately got to move the [Hurricane] Sandy supplemental to get relief to people. And that will take up days of floor time in the Senate. That limits the time we have for a fiscal bill.”

But one worry shared by Republicans and Democrats could expedite the legislative process: the economy. Pelosi mentioned a need to give “the markets” an injection of certainty.

Sen. Kelly Ayotte, R-N.H., said a deal is necessary “to give people certainty, both in the private sector and the military.

“We’ve got to work to get this resolved before the end of the year,” Ayotte said. “I’d love to get it done tomorrow.”

No Defense Bullseye

The Pentagon’s base and war budgets could collectively approach $650 billion in fiscal 2013. But as the White House and lawmakers throw ideas around about how to shrink the federal budget and pare the deficit, the word defense is rarely mentioned.

Boehner and House Republicans have put a plan on the table that calls for $300 billion in cuts to federal discretionary spending. But the speaker has not specified where those cuts should come from and which parts should be spared.

“What I’ve been hearing is the deal being discussed by Obama and Boehner would include about $100 billion in new defense cuts,” Korb said. “Given the amount of total discretionary spending that is defense spending, that wouldn’t be unthinkable or out of line as part of a big [fiscal] deal.”

Lawmakers said they had no knowledge of more defense cuts being discussed between the GOP speaker and the president.

“I don’t see a scenario where more defense cuts would be brought up,” Larsen said. “What I think is most likely is the extension of spending caps that have been on discretionary domestic and defense spending for a couple years. ... Those caps have had an effect on the deficit by driving down total projected federal spending.”

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