Lame Duck Drama

We are on course to the most consequential lame duck session of Congress in history later this year.  In the six weeks between election day in November and the 2012 holidays an enormous number of tax and budget issues must be dealt with.  It is unlikely any of these issues will be dealt with in normal course in this election year, and with looming expiration dates of December 31, 2012 for many of the provisions, the costs of inaction would be huge for the U.S. economy.

What is at stake?  Let's list the issues that have been kicked down the road until after the election.

• The Bush tax cuts that were extended to December 31, 2012 in a lame duck session after the 2010 mid-term elections.
• The Budget deal signed last August that requires $1.2 trillion in cuts to take effect January 15, 2013 with half coming from Defense and half from discretionary spending.
• The current payroll tax holiday which will expire December 31, 2012.
• Extended unemployment benefits that will expire December 31, 2012.
• The Medicare doc fix that will expire December 31, 2012.
• The federal debt ceiling of $16.393 trillion could possibly be reached in the same time period.  As of March 16, 2012, federal debt was at 15.567 trillion.  Therefore, we have $826 billion of cushion before the debt limit is reached.  Current defict spending is around $1 trillion per year-or an average of $83.3 billion per month.  10.5 months x $83.3 billion= $874.7 billion.  At this rate, the debt ceiling limit will be reached before year-end.

What are President Obama and Congress doing about all these issues right now?  Absolutely nothing.  And we can expect they will do nothing until after the election.  We are looking at a very busy November and December.  Of course, the likely casualty in all of this is likely to be good public policy.  Rushed decisions and last-minute political deals do not normally produce the best results.

Overhanging all of this drama is the fact that the decisions will be made by some who will no longer be in power in a few weeks.  That might include the President.  It is both scary and scandalous that we are running the country in this manner.

The odds are that the can will be kicked further down the road.  However, the can has a lot of dents and dings by now.  At some point it is going to break.