After Tuesday’s election left the same parties in control of the White House and Congress, lawmakers and pundits expressed optimism yesterday that Democrats and Republicans will agree to fix budget issues including unpopular cuts to the Pentagon budget.
In a day of post-election analysis, perhaps the most carefully scrutinized comments came from House Speaker John Boehner (R-Ohio). He said at the Capitol that Republicans are “willing to accept some additional revenues via tax reform” to address the so-called “fiscal cliff” of year-end budget matters, including the $500 billion in “sequestration” cuts to defense spending due to start in January.
Democratic President Barack Obama won a second term in office during Tuesday’s election, when voters also chose to keep a Republican majority in the House and Democratic leadership in the Senate. Now all sides will address the politically unpopular sequestration cuts of $1.2 trillion in defense and non-defense spending during the lame-duck session of Congress that starts next Tuesday and could last until the end of the year. Obama has called on Congress to offer him a “balanced” deficit-cutting package to replace sequestration that includes both cuts to programs Democrats cherish and increased revenues that House Republicans have resisted.
Boehner spoke against proceeding with sizable defense cuts yesterday.
”A balanced approach isn’t balanced if it means slashing national defense instead of making the common-sense spending cuts that are truly needed,” he said.
Boehner talked about avoiding the fiscal cliff, “in whole or in part,” by “making real changes to the financial structure of entitlement programs and reforming our tax code to curb special-interest loopholes and deductions.” Entitlements include Medicare and Medicaid. Boehner said Republicans and Democrats “are closer than many think to the critical mass that’s needed legislatively to get tax reform done.”
Multiple Democrats, buoyed by Obama’s decisive victory Tuesday, said Republicans should accept that voters want the wealthiest Americans to pay more in taxes. Whether to allow tax cuts for the highest income earners to expire at the end of this year is one of the sticking points in fiscal-cliff negotiations.
Senate Majority Leader Harry Reid (D-Nev.) said yesterday he will work on the fiscal cliff with Boehner, with whom he said he had a “pleasant conversation” yesterday morning.
“This isn’t something that I’m going to draw any lines in the sand; he’s not going to draw any lines in the sand, I don’t believe,” Reid told reporters at the Capitol. The Senate leader said he wants to address sequestration and the fiscal cliff during the lame-duck session.
“I’m not for kicking the can down the road,” Reid said. “I think we’ve done that far too much….We know what the issue is. We need to solve that issue. Waiting for a month, six weeks, six months, that’s not going to solve the problem.”
Political observers had mixed predictions yesterday on whether Congress will agree on a plan replace or at least delay sequestration before the end of this year.
“We are marginally more optimistic this morning that a deal can be reached to defer sequestration in a lame duck session, as this was not as close an election as some had predicted,” Byron Callan, director of Capital Alpha Partners LLC in Washington, said yesterday in a note to investors.
He said the “keystone for a deal remains compromise on revenues and entitlements,” though the timing of that deal “could come too late in the year for the comfort of defense investors.”
The Brookings Institution’s Isabel Sawhill, though, warned against having high expectations for Congress to address all fiscal-cliff issues during the lame-duck session.
“It’s called lame duck for a reason,” she said yesterday at a post-election event at the Washington think tank. “It’s not the final makeup of the Congress. So it’s not going to bind the Congress that takes office next year to some major changes.”
Sawhill, the co-director of the Center on Children and Families and the Budgeting for National Priorities Project at Brookings, predicted lawmakers will address just some fiscal cliff issues before year’s end, such as the alternative-minimum tax.
Brookings’ Robert Kagan argued that politicians must stop the sequestration cuts to “show the world that we’re capable of getting our house in order” if he United States wants to garner confidence around the world.
“The next four years are likely to be a time of tremendous challenge in foreign policy,” said Kagan, a senior fellow in the Center on the United States and Europe in Foreign Policy at Brookings.
Obama’s plan to pivot the military toward the Asia-Pacific region will require additional capabilities, Kagan said. And if Obama follows through with a pledge to prevent Iran from developing nuclear weapons, he said, the administration will require “a military component in terms of deterrence and persuasion.”