December 26, 2012
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The political line in the sand that was the so-called fiscal cliff's year-end deadline dissolved on Wednesday as the federal Treasury Department announced it could take "extraordinary measures" to create about $200 billion to keep the government operating for another two months.
As a result, the climax of the political fight to either sunset the Bush-era income tax breaks for the wealthy or face draconian across-the-board federal spending cuts does not have to be resolved in coming days, but can drag on for weeks.
The way this was announced
in Washington typified this fabricated crisis, where the Treasury Secretary said in a letter to lawmakers that the federal government would reach its current $16.4 trillion debt limit on Monday, January 31st, but his agency could take special steps to shuffle the funds from a range of other federal programs.
To begin conserving money, Treasury will suspend a program on Friday that helps states and localities manage their borrowing. In subsequent weeks, Treasury will start to tap the federal worker pension fund for additional financial resources. (The pension fund will be made whole once the debt limit impasse is resolved.) Geithner added that the resolution of the fiscal cliff could affect these estimates. In particular, he wrote, “the expiring tax provisions and automatic spending cuts, as well as the attendant delays in filing of tax returns, would have the effect of adding some additional time to the duration of the extraordinary measures.”
The prospect that the current tug-of-war between the White House and House Republicans over federal spending will continue into the new Congress cannot have been a surprise to the Obama Administration. Perhaps the White House thought it could get a better result after the new Congress is seated in early January after shrinking
the GOP's House majority in elections this fall.
While many mainstream pundits are saying that House Speaker John Boehner has lost control of his party--because of hardcore right-wingers who don't want any tax increases and don't care if retirement programs are harmed--there is an open question if he would turn to more moderate Democrats to get a majority needed to pass a more measured package of tax increases and spending reforms.
Russell Muirhead, a Dartmouth College political scientist, explored that scenario in a blog
earlier today, where he said the House GOP "cannot rule or be ruled," and suggested that Boehner act as Speaker of the entire
House, not just the GOP representatives.
And so, the political soap opera continues, as the precipitous cliff has become more like a slippery ski slope.