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Transition 2012

A guide to foreign policy and the 2012 U.S. presidential transition.

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What They’re Saying: The Fiscal Cliff and Obama’s Second Term

by Newsteam Staff
November 19, 2012

U.S. President Obama hosts a bipartisan meeting with Congressional leaders to discuss the economy November 16, 2012. (Larry Downing /Courtesy Reuters) U.S. President Obama hosts a bipartisan meeting with Congressional leaders to discuss the economy November 16, 2012. (Larry Downing /Courtesy Reuters)
The Fiscal Cliff

In Forbes, John Tamny writes that the United States won’t actually reach the point of going over the so-called fiscal cliff because politicians have incentives to reach a deal:

With the economy still limping, very few politicians will want to be on record as having voted to raise rates of taxation. Every member of the House of Representatives is up for re-election in 2014, a third of all senators are, and with an eye on re-election they’re not going to vote for large tax increases. At best with taxes, they’ll compromise: lower rates in return for a reduction in economy-distorting tax loopholes.

Marty Latz writes in USA Today that the fiscal cliff doesn’t actually have a hard deadline of January 1 and that President Obama would have more leverage to negotiate a grand bargain in 2013. Latz advises Obama:

Use your bully pulpit to promote this as a fiscal “hill” with a gradual impact on the economy, not a “cliff” with a precipitous economic drop on January 1. This will ameliorate any negative impact on January 1 and give you and the new Congress time to work out your “grand bargain.”

Steve Conover writes for The American that there is a second, less often discussed financial debacle fast approaching, the coming fight over raising the debt limit, which could trigger a default:

The fiscal cliff is the lesser of two approaching crises; the other crisis is more potentially damaging and, ironically, more easily avoidable: a first-ever default by the Both of the approaching crises — the fiscal cliff and the default threat — would be triggered by government’s failure to take action. The fiscal cliff entails near-instantaneous tax hikes and spending cuts that experts say would be too much, too fast, too arbitrary, and too soon. But a first-ever default (resulting from failure by Congress to raise the statutory debt limit) would be worse, because it would force much larger instantaneous spending reductions  — mostly in critical big-ticket categories such as Medicare, Social Security, defense, and — worst of all — interest on the debt, which would be the doomsday scenario of self-inflicted national bankruptcy.

Second Term Policy

CFR’s Edward Alden writes that President Obama should give priority to his choice of Commerce Secretary because “there is no position in the government that plays a bigger role in what the president has identified as his top second-term goal: reviving a stronger middle class in the United States.” After what he describes as a “leadership vacuum” during Obama’s first term, Alden recommends GE chief executive Jeffrey Immelt, Intel’s Paul Otellini, and Xerox’s Ursula Burns as possible nominees for the job, and says:

Whomever the president picks, he should make it clear that he is looking for the new secretary to be a committed member of his inner economic team, one who is prepared to serve out the full term. Manufacturing, innovation, exports, and investment are all at the heart of the administration’s economic agenda, and they need a strong champion. Strengthening the competitiveness of U.S. business and the attractiveness of the United States as a location for high-paying jobs requires the same steady, patient attention that U.S. diplomacy traditionally gets from a powerful Secretary of State, and tax and currency policies get from a powerful Secretary of the Treasury. It is time for a Secretary of Commerce who can stand alongside.

In the Huffington Post, Joel Rubin writes that when it comes to foreign policy, the president “should do is ignore the critics who argue that he needs to start a war with Iran to prevent its acquisition of a nuclear weapon, who argue that he should not pursue Middle East peace, and who argue that he should reject the changes sweeping the Arab world.” Noting that  56 percent of the voters who identified foreign policy as their top issue voted for President Obama, Rubin says:

The American people want him to keep on doing what he’s doing. They trust him to keep America safe. They like his pragmatic, results-oriented, calm approach. They agree with him on his handling of the Middle East, Israel, Iran, Afghanistan and terrorism. And they want him to show America’s best face to the world in a manner that strengthens our global position.

–Contributing Editor Kirsti Itameri

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