William Katz:  Urgent Agenda

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IS THIS THE DEAL? – There are rumblings, but no official confirmation this morning, that the president and Congressional leaders are close to a deal to avoid a fiscal catastrophe when automatic spending cuts and expiration of the the Bush tax cuts come into effect January 1st.  From the Politico:

Listen to top Democrats and Republicans talk on camera, and it sounds like they could not be further apart on a year-end tax-and-spending deal – a down payment on a $4 trillion grand bargain.

But behind the scenes, top officials who have been involved in the talks for many months say the contours of a deal – including the size of tax hikes and spending cuts it will likely contain — are starting to take shape.

Cut through the fog, and here’s what to expect: Taxes will go up just shy of $1.2 trillion — the middle ground of what President Barack Obama wants and what Republicans say they could stomach. Entitlement programs, mainly Medicare, will be cut by no less than $400 billion - and perhaps a lot more, to get Republicans to swallow those tax hikes. There will be at least $1.2 trillion in spending cuts and “war savings.” And any final deal will come not by a group effort but in a private deal between two men: Obama and House Speaker John Boehner (R-Ohio). The two men had what one insider described as a short, curt conversation Wednesday night — but the private lines of communications remain very much open.

No doubt, there will be lots of huffing and puffing before any deal can be had. And, no doubt, Obama and Congress could easily botch any or all three of the white-knuckle moments soon to hit this town: the automatic spending cuts and expiration of the Bush tax cuts, both of which kick in at the end of this year, and the federal debt limit that hits early next.

But it’s clear to veterans of this budget fight a deal is there to be done.

COMMENT:  Any deal would only be a start.  The single most important thing to be done to get us back from the fiscal cliff is to expand the economy.  It seems, though, that we are far from that.  Indeed, the Obama administration has a hostile attitude toward the very free-enterprise steps that can get the economy moving again.  Jobless claims last week were at 393,000, down from the previous week as the effects of Hurricane Sandy wore off, but still dramatically and dangerously high.  In general, 400,000 is considered a real worry level. 

Home sales were also down last month, calling into question a "bright spot" in the economy.

And Europe is a mess, something bound to affect us here.

I'm amused by the term "war savings."  What a disgraceful way to put things.  But it's the leftist mentality, a mentality that holds that national defense is something of a waste, drummed up by right-wingers and the "industrial-military complex."  Foreign nations listen to our internal discussions.  I wonder what the mullahs are thinking in Tehran.  They're probably thinking that those Americans are not inclined to confront them militarily because it might affect their budget.  It is calculations like this that produce tragedies.

November 29,  2012