Nov 7: Now that the election is in the past, the President and Congress must quickly address the so-called "fiscal cliff" issue. The "fiscal cliff" refers to a large predicted reduction in the budget deficit and a corresponding projected slowdown of the economy if specific laws are allowed to automatically expire or go into effect at the beginning of 2013. The laws include tax increases due to the expiration of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the former Bush tax cuts) and the severe spending reductions ("sequestrations") under the Budget Control Act of 2011, negotiated as part of a political deal between Democrats and Republicans and signed by the President to address the budget deficit. The extreme spending reductions will deal a serious blow to environmental, conservation and energy programs.
The National Association of Manufacturers (NAM) recently released a report [See WIMS 10/26/12], Fiscal Shock: America's Economic Crisis, that shows that the United States is already struggling due to Washington's failure to address the pending fiscal cliff. The report indicates that there will be a 0.6 percent loss in GDP growth by the end of 2012. The NAM report warns that, the Congress fails to act, there will be significant harm from to the economy due to massive tax increases and sequestration cuts will over the next three years. They say the results will include the following: More than 6 million jobs lost; Unemployment rate of more than 11 percent; A cumulative 12.8 percent drop in GDP; 10 percent loss in household income; and A recession in 2013 and dramatically slowed growth in 2014.
With such severe consequences hanging in the balance the President has indicated that he wants to sit down with Governor Romney to talk about where we can work together to move this country forward and is "looking forward to reaching out and working with leaders of both parties to meet the challenges we can only solve together: reducing our deficit; reforming our tax code. . ." However, just a few days ago, at a campaign event in Colorado the President said:
[referring to President Bill Clinton term of office] ". . .And his economic plan asked the wealthiest Americans to pay a little bit more so we could reduce our deficit and invest in the skills and ideas of our people. And at the time, you may be surprised to learn that the Republican Congress -- and a Senate candidate by the name of Mitt Romney -- said Bill Clinton's plan would kill jobs, kill the economy. Turns out their math back then was just as bad as it is now. Because by the end of President Clinton's second term, America had created 23 million new jobs. Incomes were up; poverty was down. Our deficit had become a surplus. . .". . .we know our ideas work because they've been tested, they've been tried. And we also know that the other folks' ideas don't work because they've been tested. Now, after Bill Clinton left office, for most of the last decade, we tried giving big tax cuts to the wealthiest Americans that we couldn't afford. We tried giving insurance companies and oil companies and Wall Street the license to do whatever they pleased. And what we got was falling incomes, and record deficits, and the slowest job growth in half a century, and an economic crisis that we've been cleaning up after ever since. . . So we've got ideas that work; we've got ideas that don't. We've tried both. We should be able to make a pretty clear choice. . ."
Yesterday, House Speaker John Boehner (R-OH) delivered a carefully worded statement which many political pundits have characterized as "conciliatory," and presenting a new effort toward finding bipartisan solutions to the nations fiscal problems. However, a careful reading of the statement indicates he is suggesting the same Republican solution that the President has been campaigning against, and saying he would not accept in the future. Speaker Boehner said, Republicans are "willing to accept new revenue, under the right conditions." Then he outlines the conditions saying:
"There will be many who say that with the election over, we should confront the first of these challenges by simply letting the top two tax rates expire, and pushing the sequester off to a later date. . . And we certainly won't solve it by simply raising tax rates. . . Mr. President, the Republican majority in the House of Representatives stands ready to work with you to do what's best for our country. . . Ernst and Young says going over part of the fiscal cliff and raising tax rates on the top two brackets will cost our economy more than 700,000 jobs. Ernst and Young also confirms many of those hit with the rate increase will be small business owners – the very people both parties acknowledge are the key to private sector job creation."There is an alternative to going over the fiscal cliff, in whole or in part. It involves making real changes to the financial structure of entitlement programs, and reforming our tax code to curb special-interest loopholes and deductions. By working together and creating a fairer, simpler, cleaner tax code, we can give our country a stronger, healthier economy. A stronger economy means more revenue, which is what the president seeks. . . in order to garner Republican support for new revenues, the president must be willing to reduce spending and shore up the entitlement programs that are the primary drivers of our debt. We aren't seeking to impose our will on the president; we're asking him to make good on his 'balanced' approach. . ."But a 'balanced' approach isn't balanced if it means higher tax rates on the small businesses that are key to getting our economy moving again and keeping it moving. . . A 'balanced' approach isn't balanced if it's done in the old Washington way of raising taxes now, and ultimately failing to cut spending in the future. A 'balanced' approach isn't balanced if it means slashing national defense instead of making the common-sense spending cuts that are truly needed. . .". . .we're willing to accept new revenue, under the right conditions. What matters is where the increased revenue comes from, and what type of reform comes with it. Does the increased revenue come from government taking a larger share of what the American people earn through higher tax rates? Or does it come as the byproduct of a growing economy, energized by a simpler, cleaner, fairer tax code, with fewer loopholes, and lower rates for all?. . . Tax reform, done in the manner I've described, will result in the additional revenue the president seeks. It will support economic growth, which means more revenue is generated for the Treasury. . ."
Similarly, as WIMS reported yesterday, Senate Minority Leader Mitch McConnell said the President needs to propose solutions that can pass the Republican controlled House. He said, "Now it's time for the President to propose solutions that actually have a chance of passing the Republican-controlled House of Representatives and a closely-divided Senate, step up to the plate on the challenges of the moment, and deliver in a way that he did not in his first four years in office. To the extent he wants to move to the political center, which is where the work gets done in a divided government, we'll be there to meet him half way. That begins by proposing a way for both parties to work together in avoiding the 'fiscal cliff' without harming a weak and fragile economy, and when that is behind us work with us to reform the tax code and our broken entitlement system. Republicans are eager to hear the President's proposals on these and many other pressing issues going forward and to do the work the people sent us here to do."
Access the President's Colorado campaign speech (click here). Access the complete statement and video from Speaker Boehner (click here). Access the statement from Sen. McConnell (click here). Access a release from NAM and link to the complete report and a summary (click here). Access more information on the fiscal cliff (click here). [#All]
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