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Can Bipartisanship Save Us From The Fiscal Cliff?


This is TELL ME MORE, from NPR News. I'm Michel Martin. Later in the program, we've been focusing a great deal on education issues. Later, with Veterans Day approaching, we thought we'd talk about some of the unique challenges veterans face returning to the classroom and how some colleges and universities are responding.

But first, we want to talk about the challenges our political leaders need to face now that the elections are over, and today we focus on something you will be hearing a lot about in the coming weeks: It's the fiscal cliff. That's the name for the automatic tax hikes and spending cuts that would kick in if the federal government does not reach a deal on the deficit by the end of the year.

These changes could affect Americans in just about every walk of life, from people serving in the military to seniors to the unemployed. And economists say that implementing those cuts - going off the cliff, if you will - could send the U.S. back into recession.

Yesterday, Fitch rating agency also said that the U.S. could lose its AAA credit rating if lawmakers don't come up with a solution. To help talk more about this, we're joined once again by one of our regulars, NPR senior business editor Marilyn Geewax.

Marilyn, welcome back. Thanks for joining us once again.


MARTIN: So before we get ahead of ourselves, could you give us a little bit more detail about what exactly the fiscal cliff is, and whose idea was this?

GEEWAX: Well, the word fiscal is just another word for budget, and cliff means you're going along at one level, and then all of a sudden, you drop to a different level. So it refers to these spending cuts that are coming and tax hikes that are built it. And they're all supposed to take affect around December 31st. But in some ways, I think we should change the word that we use from this from fiscal cliff to fiscal Sandy, because it's like Superstorm Sandy.

It's a bunch of different things all hitting at once. Some of it was by design, some of it's by accident, but it all happens at the same time. Let me just take apart a couple of the things that would be happening.

One is this set of spending cuts that are coming under this process called sequestration. You know, sometimes you hear the word sequester the jury. You set people aside. Well, sequester means when you take a certain set of spending across the board and you set it aside. And that is going to hit the Pentagon. It's going to hit all sorts of government programs.

Now, this whole process for why are they sequestering all of this government money and keeping it away from the agencies that are used to getting it, well, that goes back to last summer, the summer of 2011, when there was a debt ceiling crisis and Congress didn't want to raise the debt ceiling. House Republicans specifically were very opposed to it.

So they put into place this sort of compromise, where they agreed to raise the debt ceiling, but only in exchange for automatic spending cuts. And they thought those cuts were so draconian and so difficult to get through, that no one would let it happen. Congress would come up with a better idea.

Well, time has marched on. Nothing has happened, and now those automatic cuts are going to happen. But there's one other part of that, and that's about taxes. A lot of the Bush-era tax breaks are expiring. So all of a sudden, we're going to get to January 1st, government spending is going to drop, and taxes will go up, unless Congress acts.

MARTIN: You know, Senate Majority Leader Harry Reid spoke at a press conference yesterday and talked about working across the aisle, which is, I guess, kind of the issue, the political issue here, is that the two sides have not been able to agree. Here's a short clip of what he had to say.


SENATOR HARRY REID: American people want us to work together. Republicans want us to work together. Democrats want us to work together. They want a balanced approach to everything, but especially this situation that we have dealing with this huge deficit, and taxes that are part of that.

MARTIN: So you've talked about this a lot over the course of the last couple of months. There are just very sharp philosophical differences, you know, about the best way forward, you know, more broadly, Republicans feeling that it's important to, you know, shrink the size of the government, Democrats saying that they need a different approach, that raising revenue needs to be a part of that - the conversation, as well.

Has the election changed anything in the willingness of the two sides to compromise on each position?

GEEWAX: Well, the president did win reelection pretty convincingly. Democrats are even stronger in the Senate. President Obama can, I think, pretty reasonably say that the people have voted for him, and therefore his agenda should go forward a little more. And I think that's why you're starting to see some softening in the House Republican position. House Speaker John Boehner has said that he's a little bit more open to compromise.

MARTIN: Actually, I have a clip of him saying that. The Speaker of the House John Boehner echoed some of Democrat Harry Reid's sentiments about working across the aisle. I'll just play a short clip of that.


JOHN BOEHNER: Now, the president has signaled a willingness to do tax reform with lower rates. Republicans have signaled a willingness to accept new revenue if it comes from growth and reform. So let's start the discussion there. I'm not suggesting we compromise on our principles. But I am suggesting that we commit ourselves to creating an atmosphere where we can see common ground where it exists and seize it.

MARTIN: Where were these signals, Marilyn? Or have there been such signals?

GEEWAX: Well, previously, the House Republican position has just been no. Period. No. They are not going to raise taxes. They signed tax pledges saying we'll never raise a penny of taxes. And now you're hearing these phrases about, well, maybe we could have more government revenues. We'll have to change rates. That is, maybe you can get rid of certain loopholes without actually raising taxes, but effectively bring in more money for the government. So that's a little bit of a change. So there's - really, there are sort of four scenarios on the table right now between now and the end of the year.

One thing that could happen is a really giant deal, a real grand bargain, where they raise the debt ceiling. They change these spending cuts in all kinds of dramatic ways. They reshape the tax code. OK, that's a fantasy. That's just a - that's a Christmas wish. That's probably not going to happen.

It could, but it's very unlikely. The next level down from the grand bargain would be sort of a mini-deal, where you do something really to dent the federal budget deficit. You put some programs in place that clearly will reduce deficit spending, but you mostly put off all of the heavy talk, the big changes about how the tax code will be structured until well into 2013.

So it would just delay everything and give a new Congress more time to think it all through. Then the third approach is called the kick-the-can approach, where you do basically nothing except just grab the hands of the clock and hold on, just try to change when all of this takes place. Instead of all of these various changes taking effect on or around December 31st, they'll push it into maybe July or March or something, to give the new Congress a chance to act.

And then the fourth thing is to go over the fiscal cliff, to just do nothing. Now, there are some Democrats who say let's do that. They say the only way you're really going to get rid of those Bush-era tax breaks is to just let them expire. And if that scares the stock market, if it causes some job losses, that's just the price you have to pay, and we'll start over with a clean slate.

A lot of economists say that's kind of crazy talk, that once you start a process like that, if you let the country go over the cliff, all of these tax rates jump up, all this spending gets cut. It's like a reverse stimulus bill. It's about a $600 billion damper on the economy, and they say that would just be too high a price.

MARTIN: If you're just joining us, you're listening to TELL ME MORE, from NPR News. We're talking about the recent elections and what they could mean for discussions about the so-called fiscal cliff. We're talking with NPR senior business editor Marilyn Geewax.

You know, Marilyn, we're talking a lot about what the - kind of the leadership says and how they relate to each other around this and the conversations they have or have not had around this. And I'm wondering, you know, what the public thinks about this. We reached out on Facebook, and some listeners responded.

One listener said she really has no idea of what the president's economic plan was. And so they don't really have - you know, we're looking at this as kind of a referendum on two different economic philosophies. We're looking at the election that way. But I'm wondering: Do you think the public has a sense of what's at stake here? Is the public invested in this?

GEEWAX: Well, it's, you know, these awful words we use to describe these things. I mean, could you come up with stupider words than sequestration and fiscal cliff? And, I mean, gosh, they're so off-putting that it's almost like - you know, I covered Capitol Hill for a long time and you get used to those crazy words and you know what they're talking about, but it is like a secret code and it's hard for people to understand where we're trying to go with this.

So I think that, in some ways, it is difficult for the public to observe Washington and they just seem like crazy people, but you know, there is a process here and I think one of the things that's likely to happen in the coming weeks is that almost - the whole system, for it to work, they're going to have to go outside of their system. That is, instead of having the normal process where lawmakers sit down in a committee and go through a routine process, probably the president will rely on surrogates like Vice President Joe Biden, who has all those decades of experience in the Senate. He knows how to make that kind of thing work.

And, on the House side, Leon Panetta is the Secretary of Defense. He also is a former House member. He's also a former White House budget director. He knows what he's doing, so if you put Panetta and Biden in the room with some Republicans, you may be able to sort of ignore the normal process and come up with a deal that people - sort of normal people - can understand and relate to and then bring it back to the Congress for an up and down vote.

MARTIN: What's the one thing you would hope people would take away from this conversation? And maybe another way of asking that is, what's the one thing people should be thinking about and looking at in the weeks ahead?

GEEWAX: I would say that, honestly, this is a big deal. We need to understand that this is serious. This is not a minor issue. This isn't inside baseball and it's, like, weird stuff. This is - does FEMA have enough money to help people who need homes get them? This is - do our soldiers serving - do they have enough equipment? Do they have the right things they need to do the jobs they're being asked to do? These are very real issues and they affect our lives very much.

All of this smokescreen of weird language in these processes that we see happening on the Hill - they keep us, in a way, almost numb and not understanding how important it is, but this is very big. This fiscal cliff is serious. It could affect your life and you need to engage.

If you want to let your Congressman know what you're thinking - should it be a more balanced approach with some higher taxes and some spending cuts? That's something you probably want to let your lawmakers know how you feel about that.

But what we're dealing with here is we've got to cut spending somewhere. Everybody knows that and most economists would say there's got to be a way to come up with more revenues so that this can be a balanced approach.

MARTIN: That was NPR senior business editor Marilyn Geewax. She joined us here in our Washington, D.C. studios. Once again, Marilyn, thanks so much for joining us once again to talk about the really complicated issues.

GEEWAX: Always great to join you, Michel.


MARTIN: Just ahead, Veterans' Day is coming. That's a time we honor those who wore the uniform. We'll hear how some colleges and universities are trying to help vets make the transition from the war zone to the classroom.

MEG MITCHAM: I remember going to my guidance counselor at one point and saying, these things would never happen in the army and he said, well, you're not in the army anymore.

MARTIN: Ways to make campuses veteran-friendly. That's in just a few minutes on TELL ME MORE from NPR News. I'm Michel Martin. Transcript provided by NPR, Copyright NPR.

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