4 Reasons We Haven’t Seen the Last of the Fiscal Cliff

No, our long national nightmare isn’t over yet

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AP Photo/J. Scott Applewhite

House Speaker John Boehner of Ohio vehemently rebukes conservative groups, Thursday, Dec. 12, 2013, during a news conference on Capitol Hill in Washington.

At the end of 2013, Washington seemed to have declared a truce. A rare bipartisan two-year budget compromise wound its way through both chambers. Suddenly the improbable seemed possible: No more government shutdowns! No more painful negotiations to slice more billions in spending! No more playing Russian roulette with the full faith and credit of the U.S. government! Wall Street rallied, believing the Tea Party wars that have ravaged Washington for the past three years to be finally done. Unfortunately, the reports of the death of the fiscal cliff have been somewhat exaggerated.

The fiscal cliff remains an important weapon that factions on both sides of the aisle have great interest in wielding, especially in an election year. Here are four reasons the fiscal cliff is far from over:

1. Obamacare. Democrats need to change the subject and the fiscal wars are a proven winner for them. After the government shutdown last year, pollsters were openly speculating the House might flip. Democrats enjoyed a seven-point lead in generic congressional race match ups. And then Obamacare hit and Dems are now down seven points in generic match ups and on their heels in the news cycle. While the budget is almost done*, avoiding another potential government shutdown, a fight still remains over raising the debt ceiling. President Obama has insisted several times that he won’t consider anything but a clean bill, whereas Republicans say passing a debt ceiling increase without at least some accompanying cuts through the House is impossible. Picking this fight and sticking to their guns has a lot of upside for Democrats: polls have repeatedly shown few Americans like it when Congress holds America’s credit rating hostage. The downside is, if there is a default and the fragile recovery tanks, Dems will be blamed nearly as much as Republicans. So, what’s most likely to ensue from now until March, when the Treasury is expected to reach the limit, is a game of brinksmanship with one side eventually capitulating at the last minute.

2. Outside groups. Democrats aren’t the only ones spoiling for another debt ceiling fight. House Speaker John Boehner last month lambasted outside conservative groups. “I think they’re pushing our members in places where they don’t want to be, and frankly, I just think that they’ve lost all credibility,” Boehner said at an end-of-the-year press conference. Groups like the Club for Growth, Americans for Prosperity and Tea Party coalitions have pushed for another round of fiscal chicken and have questioned the dire predictions of economic gloom should the U.S. government default on its debt. A handful of House conservatives have called on the leadership to not acquiesce to Obama’s demand for a clean bill, even if it means a default. House Budget Committee Chairman Paul Ryan even said in December that House Republicans would be looking at “what it is we can accomplish out of this debt-limit fight,” though he’s since retreated from those remarks and most House leaders have said they have no intention of defaulting on the nation’s debt. Still, Boehner is in the uncomfortable position of either finding 218 votes for a clean bill—which would most like have to be accomplished with Democratic help—or gamble that the White house will blink. In the first two rounds of budget cuts the White House did cave but the last two times they’ve held fast.

3. The budget. I put a * above when I said the budget deal is almost done. While the top line number has been passed through both chambers, deciding and voting on what actually gets funded comes with some risks. The devil is always in the details. Most House Republicans would like to see funding for Obamacare stripped out. Most Senate Democrats will not vote for bills that do not fund Obamacare. This could prove an insurmountable impasse when push comes to shove next week. And if that happens, the deal could fall apart and we could be looking at another government shutdown, though the odds of this happening are low.

4. The sequester. The two-year budget deal may have mitigated the effects of the sequester, which instituted automatic across-the-board cuts to the Pentagon and entitlement programs, but it lasts only two years and the sequester plays out over a decade. That means in two-year’s time Congress will be right back where they started: dealing with another potential government shutdown and crippling sequester cuts.