The spirit of compromise survived less than 24 post-election hours. By then House Republicans ruled out any tax increase, while the president called for a tax increase on the rich.
I think this is increasing evidence that we will come very close to the fiscal cliff. This is because the fiscal cliff might well be the best compromise that can be worked out in D.C. in the coming months.
Let me explain.
Generally, one side of our body politic wishes to shrink the size and scope of government. The other wants to expand the reach and powers of government. Neither side has done a sufficient job in persuading a sizable majority that they are right (although, to be fair, one side has huge short-term advantages by handing out Scooby snacks).
A compromise on dealing with our budget deficit requires one or both sides to concede central parts of their arguments. This has potentially huge consequences for the political economy of future elections, so there’s not much compromise on the wind.
The spending cuts of the fiscal cliff will be far less broadly injurious than most suppose. That is simply because there is a lot of fat to cut before it becomes painful. The one exception will be a collapse of defense acquisitions, which will pummel many communities. Taxes are the big issue.
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