Washington's Latest Pathetic Fiscal Melodrama Will End Pathetically

After weeks of on-again, off-again talks and a lot of political posturing, the fiscal-cliff negotiations are coming to an anticlimactic finish. It would have been a lot easier, and certainly faster, had President Barack Obama and Mitch McConnell, the Senate Republican leader, played a round of "rock, scissors, paper" in the Oval Office.

When the Senate votes, supposedly within the next 24 hours, it will likely be on a tiny remnant of what both parties had agreed was their original goal: a $4 trillion grand bargain to reduce the national debt by overhauling entitlements and the tax code.

Instead, the best package the Senate Republican leader is likely to endorse would raise only about $600 billion over 10 years by allowing the Bush-era tax cuts to expire on upper-income Americans. It would increase a few other taxes, possibly on investment income and inherited estates. Any new revenue, however, would be eaten up by other parts of the package, including preventing the alternative minimum tax from hitting tens of millions of households and extending unemployment insurance for jobless workers whose benefits have run out. "Hats off to the president, he won," Senator Lindsey Graham, the South Carolina Republican, said on "Fox News Sunday."

But I'm getting ahead of the action. The next 24 hours will be chock full of melodrama. Obama, on a taped broadcast of NBC's "Meet the Press," began the weekend countdown by blaming Republicans for the lack of action and setting them up to pay most of the political price for failure to avert more than $600 billion in tax increases and spending cuts set to start Jan. 1. “I don’t think they would want to do that politically, but they may end up doing it,” Obama said.

Obama knows he has a strong hand; even his backup plan, should Congress take the country over the cliff, puts him in the winner's circle. “If all else fails,” Obama said, the first bill on the House and Senate floors, once a new Congress convenes on Jan. 3, would cut taxes for households earning less than $250,000, something Republicans would have no choice but to support.

Obama used some of his high-profile Sunday appearance to shift blame. It’s “just not true” that the gridlock in Congress is the result of an equal unwillingness by both parties to cooperate, he said, saying the stalemate reflects “how far certain factions inside the Republican Party have gone.” Obama expressed impatience that House Republicans spurned even painful offers by Democrats, including limits to cost-of-living increases for Social Security benefits.

The next steps will require a lot of arm-twisting by McConnell and soul-searching by House Speaker John Boehner. Under Senate rules, unanimous consent is needed to move ahead with an expedited vote on the slimmed-down package. A single senator could stall action. Boehner, moreover, will need Democratic votes to pass anything that comes over from the Senate. But he may be hesitant to work with Democrats to pass a measure that raises taxes just days before he asks his caucus to re-elect him as speaker.

The two sides are still debating many of the details of the package that will come up for a vote before midnight on Dec. 31, including where to set the income cutoff. With the president asking for $250,000 and McConnell insisting it be higher, they are likely to settle for $400,000 or $500,000. Even if Congress sends a measure to the president by midnight on Dec. 31, new revenue for the coming year would total less than $70 billion. The bill would add to federal spending by postponing cuts in Medicare payments to physicians, preventing the alternative minimum tax from hitting tens of millions of households, and extending unemployment insurance for jobless workers whose benefits have run out.

The long list of problems the bare-bones deal wouldn't fix all but guarantees that Congress and the White House will continue their trench warfare throug 2013, leaving less time for new initiatives -- on issues such as gun control, the nation's crumbling infrastructure and immigration. The deal wouldn't, for example, overhaul the biggest deficit drivers, Medicare and Medicaid. It wouldn't patch Social Security. It would take tax reform off the table entirely. It wouldn't raise the debt ceiling. It might not even stop the $110 billion in automatic, mindless cuts in defense and other domestic programs. Happy New Year, America.

(Paula Dwyer is a member of the Bloomberg View editorial board. Follow her on Twitter.)

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