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White House Should Be Ready for a Debt-Limit Deal

Author: Peter R. Orszag
November 7, 2012
Bloomberg.com

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Barack Obama's victory last night reflects discipline and foresight on the campaign trail. Now let's hope that, back in Washington, his staff was exercising similar discipline with regard to the fiscal cliff, the more than $600 billion in tax increases and spending cuts scheduled to take effect at the end of the year.

Obama has an opportunity to make necessity his friend and cut a path-breaking fiscal deal -- but doing so requires him to navigate several major obstacles.

The election results were not particularly helpful for the prospect of getting a deal done before the end of the year. Despite the president's winning margin in the Electoral College, the political configuration is basically status quo: a Democrat in the White House, Democrats controlling the Senate and Republicans running the House.

Thus, no one was really punished for the debt limit debacle of 2011. And, as we saw most vividly at that time, the form of divided government we have returned to office doesn't always work so well.

The crucial obstacle at this point is the controversy over what to do with the expiring Bush-era tax cuts. The White House has insisted that for people with incomes above $250,000 the cuts should vanish at the end of the year, while the House Republicans have insisted that all of them be extended.

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