Ken Mehlman says he is no longer involved in politics.
But as the head of public affairs for a multinational private equity firm, keeping a close eye on Washington, he says that the national debate over the fiscal cliff was potentially just the first, smaller act in the nations clouded economic future.
Appearing before the Economic Club of Florida at the Leon County Civic Center on Tuesday, the 2000 and 2004 campaign manager for President George W. Bush in both 2000 and 2004 and former chairman of the Republican National Committee, said the vote on the American Taxpayer Relief Act didnt resolve the issue, instead put matters off for two months.
What we dealt with earlier was really a slope more than a cliff, said Mehlman, who now works for the New York-based multinational private equity firm Kohlberg, Kravis and Roberts. Taxes werent automatically going to go up. They were going to go up but that increase was to occur over a 10-year period.If over the 10 years that massive tax increase would occur, that slope would have been very detrimental to our economy.
But the debt ceiling is an actual cliff. The government running out of money is an actual cliff.
In late February the U.S. Treasury will reach its credit limit unless Congress takes action to raise the debt ceiling, now at $16.4 trillion.
On March 1, the cuts from the original sequester that set the fiscal cliff go into effect, putting the national government on pace to run out of money on March 27.
Remember, Congress did not pass a budget last year, so at the end of March there will be no more money to pay for what the government does, Mehlman said.
This is harder to deal with now than a month ago because GOP leaders allowed taxes to go up without reductions in spending, he added.
Hyping the dysfunction from Washington, D.C., will again be CNBC, Fox Business News and Bloomberg, where the GOP tries to emphasize a need to cut spending equal to any increase in the debt ceiling, structure adjustments to the consumer price index to include prices as well as wages, and increase the retirement age for new workers.
Republicans will look for every way they can to make the debate about funding the government, that third part of the cliff, running out of money and not about the deficit, Mehlman said.
Meanwhile, the Democrats, the White House, make the issue that the Republicans are risking the credit of the U.S.
Theyll say for any spending reduction we need higher revenues, Mehlman said.
Because of the current state of affairs in Washington, a potential worse-case scenario is that the issue is continually patched by short-term solutions for the next year to 18 months.
Part of the problem is that the U.S. has become fractured by ideology, where people are able to reside in communities of like-minded people, get their news from sources geared toward them and political districts are carefully drawn, he said.
Asked for solutions, Mehlman suggested that something similar to the Fair Districts that Florida voters approved in 2010 may be needed.
If you look at counties that have Whole Foods but not a Cracker Barrel, Obama won 77 percent of the vote, and he won only 29 percent in counties with a Cracker Barrel but no Whole Foods, Mehlman said.
Reach Jim Turner at jturner@sunshinestatenews.com or at (772) 215-9889.
