Americans want to see Congress and the president make a deal on the “fiscal cliff,” that noxious mix of expiring tax cuts and mandatory spending slashing due at year’s end. They just don’t think it will happen without a lot of pain, according to recent polls.
But if Washington leaders don’t reach an agreement, which looks more than possible, it will be for a good reason: Incentives are strongest for policymakers to act only after the cliff has come and gone ‑ and wreaked a great deal of havoc in the process.
So far, the fiscal cliff looks like the Y2K of 2012. It’s an eventuality that requires a great deal of preparation and occupies politicians and the chattering classes but which has yet to produce the visible scars of crushed 401(k) statements, widespread layoffs or television graphics about a plunging Dow.
In a Washington where lawmakers rarely move unless an impending locomotive is about to run them over, it is hard to see how the mere possibility of a crisis can lead to action.
Some economists and politicians cite the 2008 TARP vote as proof that policymakers will indeed avert disaster and reach a deal before January 1. They say the House of Representatives’ passage of the troubled assets program shows that Congress can make politically difficult decisions on behalf of the greater good when financial markets push them.