BY TOM COLE
In once again electing a Republican House of Representatives, Democratic Senate and Democratic White House, the American people voted to maintain the status quo in Washington's balance of power. While the composition of the legislative and executive branches may remain the same, a continuation of current economic policies is not an option.
It's been clear for decades that the federal government has been running up an unsustainable debt that will bankrupt future generations and threaten the American way of life, yet a succession of Congresses and presidents have always found a way to kick the proverbial can down the road. Even the knowledge that Medicare will run out of money by 2024 and Social Security will go bankrupt by 2033 has failed to motivate lawmakers to adopt the balanced combination of spending cuts, entitlement reform and tax reform that represents our only hope of avoiding certain economic catastrophe.
However, December 31, 2012, is one deadline Congress can't ignore. If we fail to act before that date, the collection of policies dubbed the "fiscal cliff" will go into effect, guaranteeing economic turmoil. Major credit ratings agencies have already signaled their intention to downgrade our national credit rating again unless we address the fiscal cliff. Economic experts agree that our economy will go into recession again, leading to skyrocketing unemployment and economic hardship. In short, the fiscal cliff is a preview of the dire consequences in our future if we fail to immediately begin reducing our $16 trillion debt. At the same time, the deadline provides an invaluable opportunity for the federal government to get serious about overcoming partisan differences to enact policies that prevent fiscal disaster in both the short and long term.
The day after President Obama's re-election, Speaker of the House John Boehner stated that House Republicans are ready to work with the president to avert the fiscal cliff and begin balancing the budget. Speaker Boehner pledged cooperation from Congress "not as Democrats or Republicans, but as Americans" and urged the president "to lead -- not as a liberal or a conservative, but as the president of the United States of America."
The speaker identified areas in which we can find common ground but also warned against the dangers of attempting to balance the budget through tax increases. President Obama has not openly advocated raising taxes for all brackets, but administration sources have indicated it is on the table, along with the president's publicly stated preference for raising taxes for the top two brackets only. Both possibilities are foolhardy. With millions of Americans struggling in a still-sluggish economy, allowing taxes to go up for taxpayers in all brackets is unthinkable. Yet this will happen automatically unless Congress and the president reach agreement in the next few weeks to stop it. Allowing taxes to rise for just the top brackets may seem like an acceptable middle ground by comparison, but this path would be enormously damaging to the economy. Close to one million businesses would be affected by the tax hikes, leading to the loss of 700,000 jobs, according to a study by accounting firm Ernst and Young. President Obama recognized this danger when tax relief was last up for renewal in 2010 and worked with House Republicans to keep the tax cuts in place. With unemployment still close to 8 percent, the job market has not improved enough to withstand the strain that tax increases would certainly bring
However, raising tax rates is not the only way to increase revenue, nor is it the best way. Speaker Boehner has proposed comprehensive tax reform to raise revenue and lower rates. Eliminating inefficient loopholes and deductions will generate economic growth while creating a simpler, fairer tax code. As the speaker points out, we know this approach is effective. The 1986 tax reforms negotiated by President Reagan and Democratic House Speaker Tip O'Neill paved the way for the economic prosperity of the '80s and '90s. According to economist and former Treasury Secretary George P. Shultz, this landmark bipartisan reform “is sort of the unsung hero of the very good economic times we had for a long time.”
If there is any mandate conferred by the 2012 election, it is the mandate to work together to grow the economy and get the national debt under control. House Republicans have put forth a commonsense proposal to do just that without raising taxes. It is time for President Obama and Senate Democrats to do the same.