Fiscal zombie apocalypse in Washington? Obama and Congress on taxes.

Lawmakers and the White House keep putting off tough fiscal and political decisions until after the elections, prompting criticism that this is a 'Zombie Congress.'

J. Scott Applewhite/AP
President Obama lays out his plan to extend tax cuts for the middle class, during an announcement from the East Room of the White House on Monday.

Washington is facing a zombie apocalypse.

GOP presidential aspirant Mitt Romney whacks President Obama for presiding over a “zombie economy.” Rep. Jim Cooper (D) of Tennesee says Congress is remiss in its duties by putting off tough financial decisions until after the election, a season he calls the “zombie Congress” for the number of lawmakers who won’t be back in the new year.

And even more ghoulish, the last two years of economic policymaking in Washington show a White House and Congress beset by a recurring set of fiscal issues. If Washington deals with these problems at all, it's only temporarily, thus setting the nation on a course of constant fiscal crisis and brinksmanship, until Congress musters the political will to resolve them.

The White House had its own brush with the living dead Monday as President Obama reanimated perhaps the most gruesome of all the nation’s undead issues by arguing for a one-year extension of the Bush tax cuts for households making less than $250,000.

What Mr. Obama largely skipped over in his speech from the White House’s East Room? What happens in one year.

In other words, even as economists and lawmakers aligned with both parties decry the negative impact of uncertainty around taxing and spending on the nation’s economy, the issue of what the vast majority of Americans should pay to Uncle Sam will be upon us again in (at best) 12 months.

A look at the year-end fiscal cliff – or an accumulation of expiring taxing and spending provisions expected to take $560 billion out of the US economy – shows the extent to which Washington can’t put its financial demons to rest.

There’s some $400 billion in higher taxes, including the expiration of the Bush tax rates (extended by Obama in 2010), a temporary reduction in the Social Security payroll tax (passed in the lame duck session of Congress in 2011), and a host of other measures requiring annual congressional action, such as the need to patch the Alternative Minimum Tax (which saves middle-class taxpayers from a stinging tax increase) and to implement the “doc fix,” which prevents doctors from seeing their Medicare reimbursement rates slashed.

There’s $26 billion in expiring emergency unemployment benefits (extended several times since 2009). Finally, there’s $76 billion in cuts from the Budget Control Act, a deficit-capping deal struck in the heat of last summer’s negotiations to raise the national debt ceiling. Those cuts are coming into effect because Congress, recognizing its zombie problem, put automatic cuts into law in case Congress couldn’t determine an alternative path to reducing the deficit. 

Congress couldn’t figure it out, so here come the cuts.

Without a solution to a swarm of problems Washington has dealt with on a temporary basis for the last two years, America risks a further downgrade of its credit rating (by postponing any budget-balancing measures) or toppling back into a recession (by allowing all of the spending cuts and tax increases that would hit Jan. 1 to take effect.)

"We can't keep kicking the can down the road," said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, in a statement after Obama’s speech Monday. "No question, the fiscal cliff is bad economic policy and going over it will put us back into recession. But enlarging the mountain of debt we face would be disastrous as well – we have to rely on a more responsible approach. These problems only get harder to solve the longer we delay."

Obama tried to paint the issue as a bipartisan compromise Monday, arguing that since Democrats and Republicans both want tax rates to stay low for the middle class, passing an extension of some tax rates was a 50 percent victory for both sides, not a 50 percent loss.

“Let’s agree to do what we agree on,” said Obama.

Republicans in both chambers of Congress, however, hammered the president for wanting to raise taxes on anyone. House Republicans will vote to extend all the Bush tax rates later this month.

“Last week’s troubling jobs report is further proof that our economy is stalling and needs a boost. This is not the time to raise taxes. Additional burdens on families, small businesses and job creators will only make our economy worse,” said Sen. Rob Portman (R) of Ohio, in a statement.

Democrats, meanwhile, lined up behind the president. Senate majority leader Harry Reid (D) said he would discuss the president’s plan with colleagues and bring it to a vote in the coming weeks. In the House, where minority leader Nancy Pelosi (D) previously favored extending the tax cuts up to $1 million in income, the president’s allies also warmed to his proposal.

“Let's be very clear: Democrats support immediate extension of the middle income tax cuts and we have offered our support at several levels to ensure passage and provide economic security to the middle class,” said a senior Democratic House aide in an e-mailed statement.

But Obama’s statement largely allowed both parties to dig in on their established talking points: Democrats arguing that Republicans will defend the rich to the death; Republicans arguing that their Democratic foes see higher taxes as the solution to every problem.

While both sides are hoping for electoral success come November, it’s very unlikely that either party will emerge with the sort of sweeping mandate to fix America’s tax code, entitlement system, and spending priorities that either party would need.

Both parties “are articulating that you, voter, need to give us a mandate. I guarantee you, [voters] aren’t going to give anybody a mandate on Nov. 6,” says Bruce Josten, executive vice president of government affairs at the US Chamber of Commerce. “That to me defines a more precariously balanced political system than we have today.”

Meaning that if we can’t deal with the Night of the Living (Fiscal) Dead now, things aren’t going to be any better come winter.

So how do you kill America’s fiscal zombies?

In a talk Monday morning at the Brookings Institution in Washington, Gov. Chris Christie (R) of New Jersey had a simple cure – political risk taking.

“I’m coming to [Washington, D.C.] … because I want people to know that their government can work for them, but they need leaders who are willing to take risk. Risk with their own parties and risk with the public who votes for them,” Governor Christie said.

“Leadership is not just about obstructionism,” he said. “Leadership is also not about caving every time you get pushed. Leadership is about nuance and about understanding and communicating to people ‘here is what I stand for and on these issues [where] I will not be moved,’ but on other issues leaving room for discussion and accomplishing principled compromise.”

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