The fiscal cliff deal was better than no deal at all. But the real challenge for the US president and Congress in 2013 is how to get a grip on spending
It is embarrassing that elected officials have let the United States go over the fiscal cliff. While Congress passed a modest deal on the morning of 1 January, most everyone is disappointed with the results.
While the deal is much better than if no deal had been reached - and the full effect of across-the-board tax hikes and dramatic spending cuts had kicked in - it did very little to address the nation’s structural deficits and mounting debt burdens.
The agreement’s tax provisions are reasonable in the absence of comprehensive tax reform, but the ratio of revenues to spending is absurd. America’s fiscal challenge is more of a spending problem than a revenue one. It’s time for Congress and the President to address the need to reform social insurance programmes and our overly complex tax system, and to better control health care costs. These three factors are the real drivers of our structural fiscal challenge.
The actions that will take place over the next 60 days are critical if we are to achieve a fiscal 'Grand Bargain' in 2013. The President’s appointments to Treasury and the Office of Management and Budget, his Inauguration and State of the Union speeches, and his 2014 budget proposal will send big signals regarding whether he is serious about fiscal responsibility. And the posture of both the President and Congressional leaders on the debt ceiling, sequestration, and annual funding for government will be telling.
US elected officials keep kicking the can of tough choices down the road. They have been doing this for too long; it is time for more leadership rather than continued laggardship. This includes achieving a plan, a budget, outcome-based performance metrics, and a process to restore fiscal sanity and improve the economy, efficiency, effectiveness and credibility of government.
Without more leadership and real efforts to tackle its deficits the US faces the possibility of a downgrade of its credit rating by Moody’s and Standard and Poor. The current state of political affairs is also an embarrassment to America and its founders.
It’s time for truth, transparency, transformation and accountability from Washington. So much is at stake that it’s time for elected officials to step up and take the necessary actions to solve America’s fiscal crisis. It will require extraordinary presidential leadership, congressional compromise rather than conflict, and a meaningful citizen education and activation effort to succeed.
Let’s hope that we can make these things happen in 2013. After all, the debt clock is ticking and time is not working in our favour.
