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Looking over the ‘cliff’

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By Optic Editorial Board

Now that the 2012 elections are history, President Obama and lawmakers in Washington must turn their attention back to governing.

Looming on the immediate horizon is the Budget Control Act of 2011, AKA the “fiscal cliff” the nation faces beginning Jan. 1, 2013.

You may remember the financial crisis that surfaced last year when House Republicans refused to raise the debt ceiling without expense cuts. The impasse came because of their refusal to allow any sort of tax increases at the same time. An 11th-hour agreement basically postponed any substantive decisions to the first of 2013, when automatic cuts and increases take effect — unless Congress and the president come up with a way to lower the national debt by other means.

Understand that the “cliff” isn’t likely to be an economic freefall on Jan. 1. While it will be destructive to the U.S. economy (and, by logical extension, the world economy), Congress can intervene before or even after, retroactively, and change the circumstances. Left unimpeded, however, there will be an end to temporary payroll tax cuts, which would amount to a 2-percent payroll tax increase; an elimination of some business tax breaks; the sunset of the Bush tax cuts; tax increases to help pay for ObamaCare; and cuts into hundreds of government programs, from the defense department to Medicare.

The intent is to reduce the deficit — by about $560 billion, according to one estimate. But according to Congressional Budget Office projections, the economic consequences over the course of 2013 would be a 4 percent drop in the gross domestic product and a 1 percent increase in unemployment with a loss of about 2 million jobs.

In other words, expect another recession if the entirety of the Budget Control Act is allowed to remain in place over the course of 2013.

If changes are going to be made before the Act is implemented, it will have to be with the existing Congress — any newcomers elected last week would be left out. The new Congress that’s seated in 2013, however, will be able to change the law retroactively, so they aren’t exactly powerless. In fact, ultimately, next year’s lawmakers will decide this issue by either going along with this Congress or shaking things up after they’re sworn in.

The big question now: Are the Republicans and the Democrats ready to return to reasonable discussions or will they continue to impose partisan gridlock? Right now, in the wake of an incredibly divisive election, both sides are offering conciliatory rhetoric. Soon enough we’ll find out how sincere they are.

Politics, it’s been said, is “the art of compromise.” We hope to see that again in Washington. The nation needs solutions, not ideologies.

Four years ago, Obama inherited an economy in crisis. Now, despite some modest growth, it’s teetering toward the brink again. Here’s his moment to lead, but he can’t get much done without Congress. That means compromise — on both sides.