Congressional leaders left the White House after a one-hour meeting today on the fiscal slope. And their post-meeting comments could be best described as conciliatory, enough to send the stock market spiking.
I don’t know that you can put any stock in any remarks today, but for what it’s worth, here’s the White House readout:
Today, the President met with the bipartisan, bicameral leadership of Congress at the White House for over an hour. The President and the leadership had a constructive meeting and agreed to do everything possible to find a solution that averts the so-called “fiscal cliff,” and to work together to find a balanced approach to reduce our deficit that includes both revenues and cuts in spending and encourages our long-term economic and job growth. Both sides agreed that while there may be differences in our preferred approaches, we will continue a constructive process to find a solution and come to a conclusion as soon as possible. Members of the President’s senior team will continue meetings and discussions with Members of Congress and staff over the next several days while the President travels in Asia.
And here’s John Boehner:
“I outlined a framework that deals with reforming our tax code and reforming our spending. I believe that the framework that I outlined our meeting today is consistent with the president’s call for a fair and balanced approach. To show our seriousness we put revenue on the table as long as it’s accompanied by significant spending cuts.”
“And while we’re going to continue to have revenue on the table it’s going to be incumbent on my colleagues to show the American people that we’re serious about cutting spending and solving our fiscal dilemma. I believe we can do this and avert the fiscal cliff that is right in front of us today.”
And Nancy Pelosi:
“The Speaker spoke about a framework going into next year. I was focusing on how we send a message of confidence to consumers, to the markets in the short run too. That is to say that we should have a goal in terms of how much deficit reduction, we should have a deadline before Christmas.
“We should show some milestones of success so that confidence can build as we reach our solution because if we do not reach agreement, not only will we miss the opportunity for doing something good for our economy and lifting the experience and confidence in our country, we will have an economic downturn that must be avoided. We understand our responsibility there.”
Even Mitch McConnell spoke about new revenues, which is quite a different posture for him.
So the emerging consensus here looks a lot like what I described earlier this morning: a “framework” for the level of deficit reduction, perhaps on the tax and spending sides, including social insurance programs, with a six-month “down payment” of deficit reduction, and a delay of at least the sequester and possibly everything until that time. This just trades the December 2012 “fiscal cliff” with the June 2013 “fiscal cliff.” And Atrios is right, we can just keep this up indefinitely.
I’m not certain this will hold, however, especially since Republicans appear more willing to take the bait of token increases in revenues and allow Democrats to use that as a fig leaf to make cuts in social spending. It’s worth noting that the entire “fiscal cliff” is an imaginary construct, based on arbitrary cuts and tax issues that could just be delayed forever or cancelled, as the two sides will do, at least for a short time. The cliff only represents a problem to those who want to use it as a forcing event to please elites with a big deficit reduction package.
And I think the fact that the worst economic prognosticator in the world, Alan Greenspan, views this as a big scary reality shows just how imaginary it all is.
Greenspan on the fiscal cliff:
“We have to recognize that this is going to be extraordinarily difficult to solve. All of the simple low hanging fruits have been picked and the presumption that we are going to resolve the big issue on spending by making a few little twitches here and there I think is a little naive. If we get out of this with a moderate recession, I would say that the price is very cheap. The presumption that we will solve this problem without paying I think is grossly inappropriate.”
On Simpson and Bowles saying that the markets could crash if a deal isn’t made:
“I think it is not only Simpson-Bowles. I think the markets are getting very shaky. And they are getting shaky because I think fiscal policy is out of control. And I think the markets will crater if we run into any evidence that we cannot solve this problem. And I think the notion that the issue of the impact on the economy is strictly the spending tax issue, is also the market. I think we underestimate the extent to which the market value of assets has a very important impact on real GDP.”
This is just madness. It’s a forced austerity march to the sea for no discernible reason, which can be avoided simply through cancellation. The goal is to PREVENT austerity, not figure out how to implement it.