New Paper Suggests Obama and the Democrats Shouldn’t Fear Budget Brinksmanship in the Lame-Duck Congress, if That’s the Price of
The most important congressional debate this year, and maybe for many years after that, will probably take place right after the election. At that point, the lame-duck Congress will take up two huge issues: Automatic spending cuts, set to take place as part of last summer’s debt ceiling deal, and the expiration of the Bush tax cuts.
Pretty much everybody agrees that allowing those two things to happen would undermine the recovery and possibly cause a new recession by sucking so much money out of the economy. Ideally, Congress and the President should work out an alternative: An arrangement that would postpone these two dramatic changes while putting in place policies reducing deficits in the future.
But how much time would the president and Congress have to negotiate such a package? In particular, are they risking calamity if they don’t work out a deal before January 1, when those changes take effect?
Chad Stone, chief economist of the Center on Budget and Policy Priorities, thinks the answer is no. In a new paper, he argues that the effects of the expiring tax cuts on automatic spending cuts would be more gradual than most observers seem to realize: