Most of the talk about the fiscal cliff is about “going over” it, and seeing a searing shock of left-wing austerity.And that certainly is a concern.
But there’s another risk which virtually nobody is talking about, but which deserves to be discussed, and that’s the risk of too much compromise and bipartisanship.
If the mood in Washington is towards conciliation (as several people have hinted in the last 24 hours) then we might actually get the kind of “deal” that’s eluded Washington.
For all the hate hurled towards this last 112th Congress, Washington for the last two years has proven to be remarkably adroit at resisting the austerity wave that’s gripped much of the world. Each time, when it came down to the wire, Washington punted (to use a horrendously overused phrase), and pushed off all cuts and tax hikes.
It’s for this reason, that the US recovery was strong relative to much of the world.
Now that Obama isn’t trying to win re-election, and is in legacy-embracing mode, it’s very possible that he’ll try hard for that “Grand Bargain” (Naming Erskine Bowles as Treasury Secretary would be a huge sign that this is what he’s playing for). John Boehner is also strengthened relative to the Tea Party, and so is more in a position to embrace a compromise.
Thanks to new outside forces, there’s a possibility that Washington finally gets around to the austerity that the economy doesn’t need.
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