Fiscal cliff fight: Missing the big picture

Congress may well go over the so-called fiscal cliff before deciding how to smartly replace the trillions in across-the-board tax hikes and spending cuts that threaten the economy.

NEW YORK (CNNMoney) -- Which is worse: Republicans' threat to not raise the debt ceiling without more spending cuts? Or Democrats' threat to go off the fiscal cliff unless taxes go up on the rich?

It's a perverse question.

And the brinksmanship takes up time and energy that would be better spent by lawmakers coming up with smart policies that both support the economic recovery and address the country's long-term debt problem.

The current thinking is that Congress won't be able to reach an agreement on how to replace the fiscal cliff -- enormous, across-the-board tax increases and spending cuts -- until early 2013. At that point, the policies will already be in place and need to be repealed, retroactive to Jan. 1.

Around the same time, the country will reach its borrowing limit and will need to raise the debt ceiling to avoid default. The debt ceiling fight a year ago led to a downgrade of the U.S. credit rating and roiled financial markets and business confidence.

If lawmakers reach a deal on the cliff by early next year, it would minimize economic damage. But it would hardly be an impressive save.

"The image of an America that can't even avoid this quite cataclysmic set of self-imposed problems ... would be an admission that our government isn't working," said Alice Rivlin, a former director of both the Congressional Budget Office and the White House Budget Office, in testimony before the Senate Finance Committee.

Lawmakers could choose to avert the cliff altogether by canceling the spending cuts and extending the Bush tax cuts among others. But that would only serve to protect the economy in the short-run.

"Allowing the country to hit the fiscal cliff at year's end would be a dangerous mistake, but adding $7.5 trillion to our debt by extending the expiring policies and repealing the [spending cuts], without putting the budget on a more sustainable path, would be a travesty," the non-partisan Committee for a Responsible Federal Budget noted in a recent analysis.

The CRFB and other independent budget experts have been pushing for lawmakers to put aside their partisan differences and replace the entire fiscal cliff with a long-term, bipartisan grand bargain.

Time is growing short for that to happen before 2013, however.

That's why Rivlin and others have suggested a short-term postponement of fiscal cliff measures with the idea that it would go into effect next year if lawmakers fail to finalize a comprehensive debt reduction plan in 2013 that tackles both tax reform and reform of entitlement programs, such as Medicare.

Of course, there's no guarantee such a trigger would actually spur action. Case in point: The nearly $1 trillion in automatic spending cuts that makes up a big part of the fiscal cliff was itself intended to be a threatening trigger.

In the meantime, Erskine Bowles and Alan Simpson, who co-chaired the president's bipartisan debt reduction commission, are launching a campaign called Fix the Debt, which promises to "mobilize business, civic and thought leaders from both parties and people across the country, in support of a comprehensive debt deal."