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The 112th Congress: Maybe Not the Worst After All

by Edward Alden
January 3, 2013

Senate Majority Leader Harry Reid (D-NV) with members of the freshmen class of the 113th Congress on Capitol Hill (Yuri Gripas/Courtesy Reuters). Senate Majority Leader Harry Reid (D-NV) with members of the freshmen class of the 113th Congress on Capitol Hill (Yuri Gripas/Courtesy Reuters).

Welcome to the 113th Congress. The conventional wisdom is that the 112th Congress, which has now been ushered out, was the worst in modern history, and that the political process is becoming ever more dysfunctional. Howard Kurtz of the Daily Beast counted the ways, reciting the litany of non-accomplishment, culminating with the watered-down fiscal cliff deal reached at the last possible moment. David Horsey of the Los Angeles Times called it “the most worthless, incompetent, do-nothing gathering of lawmakers in the nation’s history.”

But here’s the strange thing. In the toughest economic landscape in the post-war period, this Congress actually got many of the big things right. With unemployment high and growth still weak, the central challenge was to maintain government spending and low taxes to provide economic stimulus, but without raising government debt to levels that would shake market confidence and lead to a spike in interest rates. And in its own ugly, snarling way, that was roughly what the 112th Congress accomplished.

The payroll tax cut of two percentage points, which was enacted in December 2010 in one of the string of temporary budget and tax deals between the President and Congress, put more than $1,000 per year back into the pockets of the average working American. It was maintained throughout the 112th Congress before finally expiring as part of this week’s agreement.

Unemployment benefits, which are often the only thing standing between an unemployed worker and destitution, are normally available for no more than six months, but were extended by Congress in June 2008 as unemployment rose to double-digit levels. Since then, the Congress has extended those benefits five times, most recently in the fiscal cliff deal, helping millions of families stay above water.

The full panoply of Bush tax cuts, which continued to pump money into the economy, were also extended several times until this week’s deal, which restores higher tax rates only for the top one percent of earners and leaves all other taxpayers untouched.

And, despite the occasional hiccup, markets have remained astonishingly calm throughout the whole period. With help from the Federal Reserve, both short and long-term interest rates have remained at or near historic lows, helping the gradual recovery of the housing market and consumer spending that are now sustaining U.S. growth at modest levels even as export markets have weakened.

Partisans on both sides remain deeply unhappy of course. Many Democrats would have favored much higher spending, and there’s at least a case to be made that additional fiscal stimulus would have done more to boost the economy and bring down unemployment. At the same time, however, Democrats also wanted to end the Bush tax cuts for the wealthiest much sooner, and left to their own would probably have passed budgets that had roughly the same fiscal impact as what was actually done, though with different distributional consequences.

Many Republicans, convinced we are on the brink of Greece, wanted much faster and deeper spending cuts. But the one western government that has truly taken the “tough” decisions to cut spending – the UK Conservatives under Prime Minister David Cameron – succeeded only in throwing the British economy back into recession and raising unemployment above U.S. levels.

The fiscal cliff deal, my colleague Rob Kahn suggests, will probably shave a little over one percent from GDP growth this year. It’s hard to make the case that a bigger deal, with greater tax hikes and deeper short-term spending cuts, would have been better for the economy.

It is unquestionably true that difficult decisions about how to bring revenues and spending into balance with an aging population have yet to be made. But it’s hard to single out the 112th Congress here. Various commissions have warned for two decades now that the United States needs to reform its entitlement programs, and many Congresses have failed to step up even in much stronger economic times when the decisions would have been easier politically. It’s also true that the new Congress and the President will be revisiting the fight over taxes and spending cuts almost immediately, which is a spectacle all of us would prefer not to watch again and again. But politics are rarely pretty.

The best that can be said of the 112th is that it muddled through. It was ugly, but the results were not half-bad. That’s an accomplishment worth acknowledging.

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