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- The House majority, which is now Republican, was Democratic in 2010; in addition, members are more polarized.
- The national debt is much bigger, making it harder to reach a kick-the-can fiscal deal as in December 2010 (basically both sides got all the tax cuts they wanted then without worrying about the deficit impact or the details of the legislation).
- Extending current rates is more costly under Washington’s scoring rules than in 2010 because the baseline assumes even more tax increases than in December 2010.
- The President and Republicans have just campaigned hard on distinctly different views of tax rates, making it hard to compromise on the year-end rate hike. The president wants an increase in tax rates for higher-income taxpayers. Meanwhile, the Republicans believe a tax-rate increase would hurt small businesses and jobs and are pledged to opposing tax increases, including limitations on tax deductions and credits unless they are matched with lower tax rates.
- The Administration can work to push treaties through the Senate during the lame duck session and in 2013 (treaties bypass the House.)
- There’s likely to be a further expansion of the global governance processes through the United Nations, G20, and IMF (which is off budget). Undoing the sequester (something both parties want) may give the president an opportunity to increase other high-priority spending.
- Similarly, the emergency supplemental spending needed for disaster relief for Hurricane Sandy will give opportunities to expand spending and government programs across a broad range.
- The debt limit increase gives the president leverage because of the way the law is written — he can use it to shut down parts of the government and blame the other party. The August 2011 debt-limit increase shifted fiscal responsibility from the President to the Congress through the Super Committee. I’ve advocated rewriting the debt limit so it forces spending cuts .
- Many regulations for Obamacare and Dodd-Frank are still being promulgated. Because the laws were written loosely, there is an unusually large policy impact from the wording of the regulations.
- The new Consumer Finance Protection Bureau inside the Fed has immense power because it operates outside the appropriations process and has unlimited funding. One of its most ambitious proponents, Elizabeth Warren, won a Senate seat in Massachusetts.
- The President may have the opportunity to make one or more Supreme Court appointments. He will also make numerous appointments to lower federal courts with the advice and consent of the Senate.
2012 Economic Growth Fellow
David Malpass is president of Encima Global, and chairman of GrowPac. He writes a regular Current Events column in Forbes magazine, and his opinion pieces appear regularly in the Wall Street Journal. He sits on the boards of the Economic Club of New York and the National Committee on U.S.-China Relations. Formerly, Mr. Malpass was chief economist of Bear Stearns. Between February 1984 and January 1993, he held economic appointments during the Reagan and Bush Administrations. He was Deputy Assistant Treasury Secretary for Developing Nations, a Deputy Assistant Secretary of State, Republican Staff Director of Congress’s Joint Economic Committee, and Senior Analyst for Taxes and Trade at the Senate Budget Committee.Full Bio