The fiscal cliff's shadow

By Scott Blackburn

Imagine if Congress and the White House had done their job for the last two years - if, instead of diligently avoiding every major policy decision, they had already carved out a deal to avoid massive tax hikes and spending cuts to prevent us from tumbling off the "fiscal cliff." Economic disaster would be averted, and Congress could fly home early for a well-deserved Christmas break. Right?

Probably not. While the impending income-tax increases and, to a lesser extent, spending cuts get most of the coverage, House Republicans and Obama have to agree on a slew of other legislative fixes and extensions to maintain a functioning government. And because of Washington's intransigence, these down-ballot fiscal-cliff issues may be neglected.

The most far-reaching one is the alternative minimum tax. A relic of political ambitions to make the rich pay their "fair share" in the '70s, the AMT is so poorly designed that it requires yearly congressional "exemptions" to prevent a huge tax hike for 28 million decidedly middle-income families, particularly those who have children or live in high-tax states. If you make $60,000 a year, have three kids, and live in New Jersey, the AMT could cost you $6,000 (or more) unless Congress acts by Dec. 31.

Since Congress has been tweaking the AMT to prevent these hikes every year since the '80s, one might expect it to be fairly easy to fix this year, too. But that's a hidden danger of the fiscal cliff: Normal congressional business has been pushed aside by unending debate over relatively minor differences on tax rates affecting the rich.

An AMT exemption could be tacked onto a legislative compromise on the more hotly debated tax issues. But if we go over the cliff without such a compromise, the AMT might remain unaddressed - at the expense of millions of Americans.

And after the end of the year, the AMT fix cannot be made retroactively for 2012 taxes, according to the IRS. The House and Senate have kicked this can as far as it will go.

Another often-overlooked deadline concerns what's known as the "doc fix."

In 1997, lawmakers tried to curb Medicare costs by setting a "sustainable growth rate." It didn't work: The formula leaves Medicare with a shortfall every year. So Congress has passed regular legislative fixes to ensure that Medicare payments to doctors don't plummet. Another such doc fix is due by the end of the year.

If we go over the cliff without this correction, Medicare reimbursements to doctors will drop 27 percent in 2013. And because medical professionals are forbidden to charge Medicare patients more than the program's rate, many doctors will be forced to stop treating Medicare patients. Being denied health care would probably affect seniors more than the precise tax rate paid by the wealthiest Americans.

There is more. The 2010 payroll-tax cut will also expire at the end of the year. Republicans and Democrats can't seem to decide if they want to extend it or not, but thanks to the argument over income-tax rates, there hasn't even been a debate about the payroll tax. For those outside the Beltway, that will mean less take-home pay in 2013.

In fact, an abundance of tax provisions are set to expire on Dec. 31, ranging from incentives for research and development to deductions for college tuition. The elimination of such breaks as part of an overarching reform might well be acceptable. But their inadvertent dissolution due to Washingtonian incompetence should not be.

So the next time you hear anyone suggest it's time for a fiscal-cliff dive - an idea that has become particularly popular among Democrats - remember that there is a lot more to this debate than taxes on the rich. Doing nothing is the worst possible option. Indeed, there is so much to get done that Congress and the White House may have already run out of time to do most of it.