Whats it like to stand on the edge of the fiscal cliff?
Look around. Youre on it.
Over the next 90 days, Congress and President Barack Obama will try to untangle one of the toughest fiscal knots in U.S. history. Trillions of dollars are on the line. So are tax increases, massive budget cuts, tens of thousands of jobs and how much money you take home in your paycheck.
Paying attention now?
Some are calling Jan. 1 taxaggedon day. But true to form, Congress might kick the can down the road again and put off some of the toughest choices until March, or even June.
Shocking, isnt it?
But thats what happens when members of Congress cant work together, when they cant compromise due to the disappearance of the middle in American politics. They keep delaying, hedging and dodging when it comes to truly dealing with the nations soaring debt.
By the way, were in the red these days by $16 trillion. Critics worry were looking like Greece more and more each day.
Its really pretty scary stuff.
Heres whats at stake: The future of the Bush-era tax cuts. The 2 percent payroll tax that everyones enjoyed for two years. New taxes from Obamacare. And a bunch of smaller taxes that affect certain groups of people.
If Congress lets them all expire, about 90 percent of taxpayers would see their taxes rise. The typical hit to a middle-class family $2,000.
And thats only the tax side of the ledger. Congress also ordered significant spending cuts totaling about $110 billion next year and each year after that for a decade. Unless lawmakers come up with a better idea, the reductions are to be split evenly between defense and domestic spending.
Devastating, the White House Budget Office said.
Thats not all. The lame-duck Congress also has to decide whether to increase the debt ceiling. Remember the uproar the last time Democrats and Republicans wrangled over that issue? The country nearly defaulted on its debt.
This wont surprise you either: The two parties appear to be as much at loggerheads over how to proceed as ever. Republicans are still balking at raising taxes. Democrats still insist taxes must rise to protect Medicare, Medicaid and Social Security.
If it sounds like more gridlock, it is.
But this time gridlock could mean some serious consequences. If the nation goes off the fiscal cliff because Congress does nothing and all the tax cuts expire and the spending cuts kick in the resulting wallop to the economy would probably cause another recession.
That means rising unemployment, declining output and shrinking household budgets.
But there would be an upside. The deficit that has hurt U.S. budgets for more than a decade would actually fall for once, from $1.1 trillion to $641 billion. Thats an appealing enough prospect that some folks, such as former Vermont Gov. Howard Dean, are saying that falling off the fiscal cliff wouldnt be that bad.
There will be sacrifices, Dean admits, but any politician who tells the American people there arent going to be sacrifices for everybody is a liar.
Dean, however, is in a distinct minority.
Some members of Congress maintain they can work it all out and avoid America going off the edge.
Im an eternal optimist, said U.S. Rep. Sam Graves, a Republican from Northwest Missouri. It always works out, sooner or later, one way or the other.
Sen. Claire McCaskill, a Missouri Democrat, also holds out hope: I think well come together. My goal is $4 to $5 trillion off the debt.
U.S. Rep. Kevin Yoder of Kansas is tired of waiting. He wants to get it done now.
But a lot of other folks are worried. They dont think Congress has the political spine to do anything and the inevitable outcome will be another exercise in procrastination.
Theyll defer action on all of it for as long as they think they can get away with it, predicted Thomas Mann of the Brookings Institution. It could be six months. It could be three months.
House Speaker John Boehner weighed in on the procrastination side last week, when he said that making all these big decisions in the lame-duck session would be difficult and probably wrong, too.
Frankly, Im not sure its the right thing to do, the Republican speaker told Politico. We have a lot of retiring members and defeated members voting on really big bills. Thats probably not the appropriate way to handle the lame duck.
It wasnt supposed to be this way. A congressional supercommittee last year was supposed to work all this out well before now. But the November deadline came and went, and the supercommittee proved itself, well, not so super.
The supercommittees failure, and the lack of action so far this year, led to the deadline that now looms.
Time is getting short, and Wall Street is getting nervous. In an unusual move, several top business executives said they were ready for a grand bargain even if it means raising taxes.
Of course, theyre not running for office.
Imagine what kind of stimulus it would be if politicians just reached some kind of long-term budget agreement to eliminate all this uncertainty, Goldman Sachs chief Lloyd Blankfein told Politico. Its not that easy to do. It will require some political sacrifice on both sides. But the solutions are so clearly within our means.