U.S. Senate leaders are closing in on a path for dealing with the “fiscal cliff” facing the country in January, opting to try to use a postelection session of Congress to reach agreement on a comprehensive deficit reduction deal rather than a short-term solution.
In one possible plan being floated by lawmakers and aides, senators would come to an agreement on a deficit reduction target — likely to be approx. $4 trillion over 10 years — to be reached through revenue raised by an overhaul of the tax code, savings from changes to social programs like Medicare and Social Security, and cuts to federal programs. Once the framework is approved, lawmakers would vote on expedited instructions to relevant congressional committees to draft the details over six months to a year.
If those efforts fail, another plan would take effect, which could be something similar to last year’s Simpson-Bowles fiscal commission’s plan. The recommendations included changes to Social Security, broad cuts in federal programs, and actions that would lower tax rates overall but eliminate or pare enough deductions and credits to yield as much as $2 trillion in additional revenue.
Finally, they would vote to put off the automatic spending cuts, known as sequestration, and tax increases scheduled to hit all at once in January — but with some deficit reduction down-payment to signal how serious Congress is.
Outside groups are weighing in with solutions to, and predictions of, sequestrations effects. The watchdog group Tax Payers for Common Sense says that the government could cut programs identified as "inefficient, ineffective, or wasteful" and save more than $2 trillion. Meanwhile, a report from the Urban Institute and the Urban-Brookings Tax Policy Center released Oct. 1 says that taxes on the average household would increase nearly $3,500 if the sequester was allowed to occur.
With both political parties awaiting the outcome of the election, negotiators will not even try to determine how much money would come from the three components until after the voting when, presumably, the victorious side would emerge with new leverage.
After so many false starts, even those involved in the talks are reluctant to express much optimism.
Senate minority leader, Sen. Mitch McConnell (R-Ky.), and other Republicans said only the president could make a deal happen.
“I encourage all these discussions,” he said. “They’re all good. But we need the president, whoever that is, to not be a bystander like this president, to step up to the plate, and do three things: make the deal, deliver the members of his party, and sign the bill.”