President Barack Obama doesn't have much time to celebrate his re-election. He must now confront the fiscal cliff — nearly $500 billion in automatic tax hikes and spending cuts set to take effect in January that could throw the nation back into recession.
With a divided Congress, what can we expect to happen next?
Steve Bell, senior director of economic policy with the Bipartisan Policy Center and former staff director of the Senate Budget Committee, joined The Daily Circuit Thursday.
"This has been played out many times," Bell said. "We always wait till the last second, we always cut some sort of deal, we always do it in the most clumsy and painful way disrupting both markets and people's lives. The assumption is that because that's the habit into which we've fallen, that's what will happen this time. I'm not sure that's true because the issues are very, very large in number and very complex."
This year, Congress has four to six years of things that have been put off for this lame duck session, Bell said.
"We have 22 working days in an atmosphere where people who've been defeated are still going to be making the decisions," he said.
Andrew Fieldhouse, federal budget policy analyst with the Economic Policy Institute, also joined the discussion. He said the issues will more likely be resolved in 2013. There are a number of actions Treasury Secretary Timothy Geithner and the Office of Management and Budget could take if needed to delay some of these automatic changes.
Fieldhouse said the framing of the fiscal cliff with the federal deficit is strange.
"What the fiscal cliff actually reveals is that budget deficits are closing too quickly, meaning public debt accumulating too slowly will push the economy into another recession," Fieldhouse said. "You've actually got a huge contraction built in between the current law baseline -- what's been legislated; between current policy; what people expect will continue; and what's been legislated for this year within the fiscal cliff."
Fieldhouse said we should be most concerned with the legislation enacted this year, including the expiration of the ad hoc fiscal stimulus payroll tax cuts and emergency unemployment benefits.
"Overall, the drag between what's enacted essentially for this year and next year is 3.7 percent of GDP," Fieldhouse said. "This really is enough to push the economy into recession. So you have to fundamentally reorient fiscal policy to accommodate economic recovery and that means moderating the pace of deficit reduction while the economy remains depressed."
A caller from Hastings said it is time for all Americans to help fix our country's economic problems.
"One of the things we have to accept is that we're all going to have to pay higher taxes," he said. "We went 12 years not collecting enough money to pay the government debts; we built up this huge debt now. We're going to have to address it."
Bell said that when discussing letting the Bush tax cuts expire to increase taxes, it's really important to think about it in a different context.
"Over the next 10 years, the Bush tax cuts will cost in lost revenue about $4 trillion," he said. "Three-quarters of that will go to people who make less than this magic $200,000 a year adjusted gross income. One-quarter of the Bush tax cuts will affect upper-income people... If the Bush tax cuts expire entirely, the people who will be hurt most will be people who used earned income tax credit, the childcare tax credit."
On the blog, Hilary said she would approve of shared sacrifice.
"I would be willing to pay higher taxes if there was some removal of tax exemptions," she wrote. "Additionally we need a smarter not bigger military, which should reduce costs. I also think that entitlements should be means-tested and possibly have the age to join increased. These ideas were all presented by both sides during the election. I know the details matter but there should be common ground."
MPR News' Madelyn Mahon contributed to this report.