The problem with a temporary deal is that with the Sword of Damocles no longer poised above their heads, there would be little impetus for Congress to reform the tax code, deal with entitlements, or make further cuts in discretionary spending in order to get our fiscal house in order. The notion that an interim agreement would automatically lead to a “Grand Bargain” on taxes, spending, and entitlements is nonsense. Democrats are under enormous pressure not to cut a dime from Medicare or Social Security while Republicans are feeling the heat on giving up too much on the revenue side of the ledger. This is a recipe for gridlock, not compromise. We would be back exactly where we were for most of the last year: stalemate, name calling, and paralysis.
Some on both sides are calling for the Kool-Aid option: voluntarily jumping off the fiscal cliff. Some conservatives think that this is the only way to significantly cut the budget even if it will result in tax increases, while some liberals are licking their lips at the probability that the GOP would be blamed for the fiasco even though there would be significant cuts to Medicare. Neither side is being taken seriously by the party leadership on the Hill, although that doesn’t necessarily make coming to an agreement any easier.
You don’t have to be a betting man to wager that the two sides will probably make a deal at the absolute last minute. Nor does one have to be a soothsayer to predict that the probable reaction to a compromise on both sides will be the complaint that their guys “caved in” to the other side. In the end, an agreement that neither side will find palatable or support with much enthusiasm will be reached. Then, Democrats and Republicans can go back to business as usual: inventing new ways to spend money we don’t have on things we probably don’t need.