Last year Congress put a gun to its head to force it to tackle the federal government’s horrendous fiscal mess.
The gun took the form of “sequestration” — $1.2 trillion in automatic cuts, selected not through reasoned deliberation but through blunt across-the-board cuts to be divided 50-50 over a decade between discretionary domestic programs and defense. (This is on top of $487 billion in defense cuts that Defense Secretary Leon Panetta is already overseeing.)
Now the time has arrived for the gun to go off — unless Congress does the right thing and prevents the trigger from firing. Officials need to craft a more responsible way to tackle the deficit.
The federal government is borrowing $4 for every $10 it spends. It’s a dangerously unsustainable path, and we need strong national leadership to address the problem.
Rudolph Penner, former director of the Congressional Budget Office, was in Omaha recently and stated, “I have been working around budgets for 40 years, and this is the most dangerous situation I can remember.”
Just the other day about 80 corporate chief executive officers announced that they have formed a campaign to push Congress into coming up with a long-term deficit reduction plan.
The country needs predictability in our budget and tax policy so that households and businesses can properly plan for the future. The uncertainty is a huge drag on the national economy. A new report from the National Association of Manufacturers predicts, as described in the Washington Post, that “the economic damage would deepen considerably if Congress fails to avert the cliff, destroying nearly 6 million jobs through 2014 and sending the unemployment rate soaring to near 12 percent.”
With the November elections now settled, lawmakers need to strike a reasonable compromise — one that will cross party lines, given that the election outcomes did not result in one party controlling all levers of power in Washington.
So far, Congress remains paralyzed by Capitol Hill’s notorious partisan gridlock. Unless lawmakers come together and agree on a sensible resolution, the result — starting Jan. 2 of next year — will be not only the sequestration cuts but also an avalanche of tax increases.
Some 90 percent of Americans, the Tax Policy Center concludes, would be hit by higher federal taxes in some form.
The Associated Press has reported: “A typical middle-income family making $40,000 to $64,000 a year could see its taxes go up by $2,000 next year if lawmakers fail to renew a lengthy roster of tax cuts set to expire at the end of the year. ...
“A married couple earning $50,000 with three dependent children that currently receive an almost $1,500 income tax refund largely because of the child tax credit would see their fortunes reversed by more than $3,000 next year and pay more than $1,500 in income taxes while seeing their payroll taxes go up by $1,000 if the full menu of tax cuts expires.”
In addition, there would be higher federal taxes on incomes and dividends, hitting owners of small- and medium-sized businesses.
Add up these tax increases, and they would deliver a gigantic wallop to the nation’s economy.
Various groups of serious-minded leaders — most famously the Simpson-Bowles commission — have commendably put forward compromise plans for long-term deficit reduction, and it’s discouraging that nothing like a majority in Congress has materialized in support of any of them. The Simpson-Bowles plan provides a reasonable starting point for serious budget discussion. Yet when it was put before the U.S. House for a vote, it received only 38 votes in support and a whopping 382 in opposition.
Lawmakers evidently would rather keep themselves in ideological straitjackets than break free and reach a workable long-term agreement. Lawmakers as well as President Barack Obama need to show leadership in an additional way, telling Americans the hard truth that cutting the budget can’t be done painlessly by merely cutting “spending we don’t need,” as the president casually put it in one debate.
On the contrary, our political leaders need to have the backbone to explain that a lot of the cuts will be politically unpopular but necessary. Given the magnitude of the deficit problem, that is the fiscally responsible course.
Some lawmakers are stepping forward to try to break the impasse, though. One is U.S. Sen. Mike Johanns of Nebraska, who has joined a bipartisan group of eight senators to work toward a sensible budget framework.
Now that the election has been decided, our leaders need to look to the national interest, hash out their differences and put us on a sustainable fiscal course. That need transcends the interests of parties, special interests and individual politicians.
Responsible leaders must now seize the moment and do the right thing. Americans should insist on it.