Weighing The Week Ahead: Decision Time?

After many months of debate, sparring, and posturing, the deadline has arrived for U.S. policymakers to resolve the various matters that are popularly described as the "fiscal cliff." This is a handy simplification. In the finest American tradition it allows everyone to have an opinion whether or not they have any information!

The average person knows only that something really bad is about to happen, and it will send taxes higher. Observers in other parts of the world see the U.S. as unable to address major problems while still offering plenty of advice to every other country. Many of the media sources are unable to distinguish between political commentary and analysis of developments

The oversimplification adopted by a leading financial TV network is that leaders should "rise above" politics and simply do what is right. An obvious problem with this approach is that no one elected the network to tell the rest of us what is right.

Some Helpful Distinctions

There are two major mistakes that account for most of the bogus analysis.

Emphasis on politics. During elections issues are sharply framed. Appeals are directed at the most extreme and partisan elements. Television ads are negative. In the time between elections the U.S. has historically enjoyed periods of bipartisan cooperation, especially when there was a widely recognized problem or a common enemy.

Those who have followed the hard-hitting elections of the last decade often lose perspective. They cannot imagine a person they voted against behaving in a cooperative fashion.

Blaming participants rather than the process. It is entirely possible for everyone involved to be intelligent, well-intentioned, and hard-working -- and yet we still have a terrible outcome. The U.S. has a very conservative political process; it is easy to block change. Here's why a policy desired by the majority can often be easily blocked:

• Either House of Congress or the President can stop a proposal. All must agree to any changes.
• The Senate requires a 60% super majority on most legislation, since a minority can delay indefinitely through the filibuster. Ending a filibuster requires a cloture motion, and 60 of the 100 votes. (It used to take 67!)
• The House Speaker can block proposals from reaching the floor for a vote. This is true even when a majority would support the proposal if a vote were to be taken. The Republicans follow something called the "Hastert Rule" (named after former Speaker Dennis Hastert). This custom (not a legal procedure) says that the Speaker should only allow a vote on legislation supported by a majority of Republicans -- a majority of the majority. Since the GOP has a slim majority in the House, it means that 27% could block the wishes of the entire House. (There are some arcane methods for avoiding this, but not effective in the current case).

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Despite these obstacles, the process has worked well enough for over 200 years. Has something gone wrong? Are things somehow different?

Yes, there have been changes, and not for the good. I'll offer my own take on what to expect on the fiscal cliff in the conclusion. Let us first do our regular review of last week's news and data.

Background on "Weighing the Week Ahead"

There are many good lists of upcoming events. One source I especially like is the weekly post from the WSJ's Cliff Notes series as needed, but will probably not do a WTWA segment next week.