The political and economic ramifications are too big for Washington to let the large tax increases and spending cuts take effect. But this doesn't necessarily mean lawmakers will craft a decisive solution to the nation's fiscal woes.
This is the cover story from the Nov. 26 edition of The Christian Science MonitorWeekly.
Zina Saunders illustration
EnlargeRelax, America. You can put your parachutes away. Washington isn't likely to take the country over the dreaded "fiscal cliff." Even a capital city as deadlocked and dysfunctional as Washington has been in recent years is not likely to risk a move that has so many economic and political ramifications, according to a wide range of experts.
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That is not to say the journey won't be contentious and perhaps a cliffhanger. Don't forget, the same cast of characters is starring in this big-screen epic ? either a dark comedy or a thriller, take your pick ? that has brought Americans to this point before: Democrats ruling the White House and Senate, and Republicans, including a clique of unyielding conservatives, in power in the House.
Yet analysts on both sides of the aisle believe that doing nothing, which on Jan. 1 would trigger the beginning of $600 billion in tax increases and large cuts to the federal budget, would inflict too much damage on individuals' wallets, on the economy, and on America's standing in the world.
The fiscal cliff, after all, was never intended to be a serious option. The elements of it grew out of years of debt avoidance and budget gimmickry that finally peaked in 2011 with the impasse over raising the federal debt ceiling. After a bipartisan congressional panel failed to agree on spending cuts, Republicans and Democrats added the infamous "sequestration" portion ? a series of automatic spending cuts that were so distasteful that lawmakers would be forced to agree on more sensible trims.
While an agreement to avoid the cliff could still prove elusive, many veteran Washington-watchers believe a compromise will be worked out to avoid plunging into the abyss on New Year's Eve.
"America's reputation and its economic stability are threatened dramatically by inaction," says Dan Glickman, a senior fellow at the Bipartisan Policy Center who previously served as President Clinton's secretary of Agriculture. "Except for a few zealots, most people aren't going to want to see that happen."
Some even believe that the looming fiscal cliff will eventually lead to a grand bargain between the White House and Capitol Hill on reforming America's tax code and entitlement programs ? setting the tone, perhaps, for other agreements over the next few years on issues from immigration to energy. But let's not get ahead of ourselves. Here are five reasons America won't ? or let's say shouldn't ? plunge off the fiscal cliff on Jan. 1.
Because of the "R" word.
Many believe the specter of a double-dip recession remains the most important reason that Congress and the president will reach some sort of accommodation by Jan. 1. It's something that neither party wants to see ? or be blamed for.
The Congressional Budget Office estimates that with the massive spending cuts and tax increases imposed by the cliff, US gross domestic product would shrink by a half percentage point in 2013. (Some private sector forecasters believe the hit could be even more severe.) That amounts to 2.7 million fewer jobs than the economy would otherwise create by year's end, the CBO says, which would push the unemployment rate, now at 7.9 percent, above 9 percent.
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