Is last-minute deal in the cards?
It's five days and counting before cliff-diving time.
As the year-end fiscal cliff draws ever closer, the common question among those paying attention is, "Why can't President Obama and Congress reach an agreement?"
It's a reasonable question — but it comes with the admonition that "people should be careful what they ask for." President Obama and Congress are trying to reach an agreement that would avoid the consequences of an agreement they previously reached — the establishment of a Dec. 31 deadline to reach an agreement on tax and spending rates.
It was President Obama and the Congress who decided that if no budget agreement could be worked out, a default arrangement would allow all the tax cuts (an estimated $536 billion) passed under President Bush in 1991 and 1993 to expire and that $110 billion in spending cuts spread across the Pentagon and many other federal departments would be implemented.
Also at stake are the impending expirations of unemployment benefits for the long-term unemployed and the 2 percent cut in payroll taxes Obama recommended to stimulate the economy.
Jan. 1 also is the date that a wide variety of Obamacare tax hikes are scheduled to begin. They will affect — directly or indirectly — every American.
Given the length and breadth of tax hikes and spending cuts and the division of power between Democrats and Republicans, it should be obvious that both sides will have to make accommodations to reach a deal. Republicans will have to accept some tax hikes they don't want while Obama will have to approve some spending cuts he doesn't want to reach an agreement.
So far, unfortunately, each side says the other won't bend, a claim that everyone should take with a grain of salt.
There will be a last-minute effort to reach a deal before Dec. 31. But we all go over the cliff if nothing can be worked out.
What then? Some have suggested the country will fall back into recession if the ongoing weak recovery takes the kind of jolt predicted by the hard landing from a high cliff.
It would not be immediate, however, so there still would be time for President Obama and Congress to work out a settlement. Circumstances would be different in a post-cliff dive setting because both sides would be writing new legislation on a blank canvas. And they'd be more different still when the new Congress, the one elected in November, takes office in early January.
Still, it would be best to avoid all the drama. The legislative consequences of a cliff dive are clear. But the psychological consequences are unknown.
Last week's skittishness on Wall Street demonstrates that the business and investment community is getting increasingly nervous amid all the uncertainty. Weak Christmas sales showed consumers are hanging on to their money, and public opinion polls demonstrate a lack of optimism about the future.
The partisan standoff in Washington, D.C., can only exacerbate this shaky situation. President Obama and House Republicans will be running an unnecessary risk on the nation's economy if they don't work things out.