–Budget Think Tank Says Fiscal Cliff Can Be ‘Real Turning Point’ For US
–Peterson Foundation To Hold Post-Elect Conference To Consider Options
–Two Former Senators Call For A ‘Better’ Fiscal Cliff To Fix Deficit

By John Shaw

WASHINGTON (MNI) – While most of the reporting and commentary
regarding the fiscal cliff has focused on the large dangers its poses
for the American and world economies, a number of budget experts argue
forcefully that it also creates a critical — and possibly an historic
— opportunity to redirect U.S. fiscal policy.

“The fiscal cliff creates a huge opportunity to change our fiscal
policy, largely because doing nothing poses such a danger,” says Bob
Bixby, the executive director of the Concord Coalition, a budget
watchdog group.

“There is no doubt the fiscal cliff is an action forcing
event. If we do nothing, taxes will go up significantly and there will
be substantial across-the-board spending cuts. No one — or almost no
one — wants that to happen. But legislation must pass in this Congress
to prevent that from happening,” he adds.

Bixby said the best realistic solution would be for Congress in the
post-election session to vote to replace the fiscal cliff with the
framework of a major deficit reduction plan along the lines of those
presented by the Simpson-Bowles or Domenici-Rivlin commissions. This
deficit reduction framework would be implemented by a detailed deficit
reduction bill early next year with specific spending cuts and revenue
increases.

Congress will reconvene Nov. 13, a week after the Nov. 6
presidential and congressional elections.

In a recent essay, former Senators Pete Domenici and Sam Nunn
likened the fiscal cliff to a “suicide pact” that was designed to
compel policymakers to make difficult fiscal choices.

“A grand bargain of some sort — including spending cuts and higher
revenue in the same legislative package — will eventually be needed. In
the meantime, quick action is also necessary to establish a more
rational default position, one that may not be anyone’s ideal but that
both Republicans and Democrats can live with unless and until a grand
bargain is reached,” they wrote.

Domenici and Nunn said that while reaching a grand bargain is
unlikely during the Lame Duck session, Congress could replace the fiscal
cliff with “broad targets for deficit reduction along the lines of
Simpson-Bowles and Domenici-Rivlin to take effect if no other deal is
reached.”

The Peter G. Peterson Foundation has scheduled a conference for
Friday, November 16, to consider the best way ahead for U.S. budget
policy given the impending fiscal cliff.

The Peterson Foundation’s event will include “elected officials
and leading policymakers” who will discuss potential paths forward. Five
think tanks will present their proposals for addressing the fiscal
cliff.

A specific agenda for the conference has not yet been released.

“The fiscal cliff presents a critical opportunity for policymakers
and a real turning point for the country,” the Peterson Foundation said
in a statement.

“Instead of allowing our economy to go over the Fiscal Cliff, or
once again avoiding action on our nation’s long-term debt and deficits,
leaders should seize this opportunity to pass a comprehensive bipartisan
plan to deal with our long-term structural debt and put America on the
path to a stronger economic future,” it added.

The fiscal cliff refers to the convergence of several significant
events: the expiration of the Bush era tax cuts and dozens of other tax
provisions at the end of this year; the first round of across-the-board
spending cuts that are scheduled to begin in January; and the need to
increase the statutory debt ceiling in the coming months.

The Bipartisan Policy Center, a think tank, has been working on a
proposal for months and released its most recent version several weeks
ago.

The BPC plan calls for delaying key fiscal cliff deadlines for six
months by passing a law in the post election session of Congress that
includes a deficit reduction framework with “real cuts in spending and
increases in taxes as a down payment.”

The BPC plan further requires the next Congress to pass a $4
trillion deficit reduction plan in early 2013. If Congress fails to
approve that follow-up plan, a “backstop” would automatically become law
that would secure that deficit cut goals are met.

The BPC proposal’s “backstop” would consist of automatic spending
cuts and tax increases.

The think tank proposal says Congress should not eliminate the
sequester (across-the-board spending cuts) and extend current tax
policy. “Fully abrogating the sequester and simply expending current tax
policy will call into question America’s ability to establish a
sustainable fiscal path,” the think tank said.

But it added that it’s imperative to “avoid ham-handed, across-the-
board cuts and drastic tax increases,” saying these steps would “hammer
the nation’s taxpayers and potentially throw the U.S. economy back into
a recession.”

Various informal groups of lawmakers continue to develop fiscal
ideas that could be offered in Congress’s post-election session.

The Gang of Eight, a bipartisan group of eight senators, continues
to draft a deficit reduction package of about $4 trillion over a decade,
the outlines of which will be ready for Congress to consider by
November.

** MNI Washington Bureau: (202) 371-2121 **

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