Keep payroll taxes low and fight for entitlement reform.
James C. Capretta
Negotiations between congressional Republicans and the White House will intensify this week as the deadline for steering clear of the year-end “fiscal cliff” approaches. Like the 2011 showdown over the debt limit, these talks will be a high-stakes affair for both parties, with the potential for lasting political effects. With so much at stake, how should the GOP approach the talks? The following are a few suggestions for navigating the treacherous political waters that lie ahead.
Acknowledge the Economic and Policy Risks of Going Over the Cliff.
Tempting as it might be, the GOP should resist minimizing the very real and very likely negative consequences of going over the cliff. It is true that the risks are uncertain. Indeed, it is possible that, despite predictions to the contrary, the U.S. economy would continue to grow modestly, even with $500 billion in immediate tax hikes and spending cuts. And it is also possible that, despite massive cuts in U.S. military spending, there would be no real-world consequences in terms of degraded capacity to defend our interests worldwide.