Victoria Billings
vbillings@mustangdaily.net
The election is over, but now the real work for members of Congress begins.
The recession may be over and the economy on its tentative way to recovery, but all that could be endangered Jan. 1, if congressional Republicans and liberals can’t agree on how to balance the budget. If Congress cannot reach a compromise between spending cuts and tax increases by the end of December, automatic federal spending cuts, called sequestration, will go into effect.
Congress created sequestration, also known as the “fiscal cliff,” in case agreement on the budget could not be reached, and now threatens to automatically cut military spending, social programs and education, among other services, Cal Poly political science professor Allen Settle said.
“I think right now there’s a good chance we’ll go over that cliff unless Congress can compromise, and they’re not known for compromising at all,” Settle said.
Currently, congressional Republicans refuse to budge on rolling back Bush tax cuts, while Democrats argue that without tax increases, the budget will never be balanced, Settle said.
The only hope to avoid going over the edge is if Democrats can provide equal or greater cuts to balance than any proposed tax increases, Settle said.
Settle believes both sides of the aisle could avoid the cliff by passing a general budget, and then focusing on thornier issues such as entitlements in the next Congressional year, he said.
“If they try to take on entitlements this calendar year, I’m not persuaded they have enough time to do it,” Settle said.
Some more conservative groups, such as members of the Tea Party, have come out in favor of sequestration, arguing that sharp cuts are necessary to fix the government, Settle said.
If the fiscal cliff forces politicians to cooperate, business senior Nik Kontrimas is one proponent, he said.
“If the government has to shut down to actually talk sense and to get stuff done then personally that’s what they need to do,” Kontrimas said.
Kontrimas, who studies tax code, believes closing loopholes, cutting taxes and stimulating economic growth are a big part of the solution, he said.
“I think we’re in sort of that phase where we have the potential to go into a recession again but we also have the potential to continue and go into economic expansion,” Kontrimas said.
In many European countries, however, austerity measures have only worsened the economic situation, as in Greece, Settle said.
Even if the cliff is avoided, however, there are those who believe a recession is unavoidable. According to economic experts Erskine Bowles and Alan Simpson, who published their plan to fix the economy in 2010, another recession may be unavoidable, Settle said.
“We have a great chance of going into a recession in 2013 regardless of what Congress does,” Settle said. “Congress needs to take decisive action, not just in sequestration.”
And another recession would have enormously detrimental effects on the average American worker, Cal Poly economics professor Kathryn Marshall said.
“We’re in a weak economy already. A lot of people are, you know, barely getting by so it’s not going to help to have the unemployment get worse,” Marshall said.
Sequestration also threatens federal unemployment aid, meaning those without jobs would have a harder time getting by between employment, Marshall said.
Marshall remains confident, though, that Congress will reach a compromise before the end of December. Allowing sequestration to occur would damage Congress’ reputation irrevocably, she said.
“They’re not going to let it happen. If they did, it’s like everybody’s going to lose faith in the political system,” Marshall said.
The Congressional Budget Office is predicting a recession can be avoided if Congress doesn’t push the government over the fiscal cliff, Marshall said.
Those are only predictions, however, and those in the economics game recognize that the future could be a much brighter, or much more grim, than currently believed, Marshall said.
“The big concern is the Congressional Budget Office could be wrong,” Marshall said. “It could be a lot worse.”