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Now that the election is over, President Barack Obama and Congress must confront the fiscal cliff—sweeping tax increases and spending cuts that would sharply reduce the federal deficit but likely push the U.S. economy back into recession, experts say.
Without congressional action, Jan. 1 will bring expiration of the Bush-era tax cuts, extended jobless benefits and 2 percent payroll-tax cut. In addition, there will be deep reductions in Medicare payment rates and across-the-board spending cuts in most defense and non-defense discretionary programs.
The plurality of respondents to this week’s RBJ Daily Report Snap Poll says Congress should enact major spending and tax reform before the looming fiscal cliff deadline.
Nearly half of poll participants—47 percent—want Congress to enact major spending and tax reform before the Jan. 1 deadline. Some 44 percent recommend extending current spending and tax rates, then making tax and spending reform the top priority next year.
Less than 10 percent think it’s a good idea to allow the fiscal cliff spending cuts and tax increases to occur.
Nearly 100 top U.S. CEOs recently declared their support for the Fix the Debt campaign, which advocates phased-in major deficit reduction through both spending cuts and changes that “simplify the tax code and eliminate loopholes through pro-growth and revenue-positive tax reform.” As a starting point, it uses the bipartisan Simpson-Bowles commission recommendations.
In response, the Tax Relief Coalition—which includes the Chamber of Commerce and other business groups—urged Congress to extend current policy to avoid the fiscal cliff. Then, tax and entitlement reform should be the top priority of the next Congress, with “significantly more in spending reductions than in (increased) revenue.” The coalition believes the Simpson-Bowles plan calls for too much increased tax revenue.
Roughly 42 percent of Snap Poll respondents favor more spending cuts than increased tax revenue as the approach to fiscal reform. Slightly less than a quarter call for equal amounts of spending cuts and increased tax revenue.
Roughly 735 readers participated in this week’s poll, which was conducted Nov. 5 and 6.
How should Congress and the president deal with the fiscal cliff?
Enact major spending and tax reform before the Jan. 1 fiscal cliff deadline: 47%
Extend current spending and tax rates; make tax and spending reform the top priority next year: 44%
Allow the fiscal cliff spending cuts and tax increases to occur: 9%
Which of the following approaches to fiscal reform do you favor?
More spending cuts than increased tax revenue: 42%
Equal amounts of spending cuts and increased tax revenue: 24%
Spending cuts only: 21%
More increased tax revenue than spending cuts: 11%
Increased tax revenue only: 1%
The Simpson-Bowles plan has been on the table for more than a year. It is a well-thought-out, bipartisan approach to the debt-deficit issue. It’s time Congress took it up.
—Jim Haefner, Pittsford
The $16.20 trillion debt must be addressed. Each citizen’s share of the debt is over $51,000. We have a spending problem; it can’t be solved with increasing taxes only.
—David Young, Young & Co. CPAs LLP
The United States needs to get serious about cutting military spending. The U.S. military budget accounts for approximately 40 percent of global arms spending. The 2012 budget is six to seven times larger than the $106 billion of the military budget of China and is more than the next 20 largest military spenders combined!
Simply to increase taxation and reduce spending without rethinking and recreating how the United States spends and allocates her financial resources will likely increase the burden on the middle class and increase the plight of the poor.
I would like to see some collaboration in Congress.
—Joy Ryen Plotnik
I quote Sen. Alan Simpson, who said that anyone who comes to Washington unwilling to compromise is someone with rocks in his head. Grover Norquist’s no-tax pledge is dogma. And fact-free dogma, at that. We need expedience.
—Jon Wilder, president, H&W Technology LLC
Congress will never reach agreement on this critical issue this year. If this country falls off the tax cliff, there is no doubt in my mind that the country will quickly fall into a very deep recession. We must not let that happen.
With unprecedented deficit spending already in place, I’m not sure how anyone can be sure about a precise approach, but clearly a lot of programs/agencies/institutions need to accept a hit to their budget and the base of citizens who actually pay taxes must expand, since we have passed the point where more is paid out than is paid in.
I suggest that Congress take this all the way to the cliff’s edge—and then jump!
If government employee entitlements were reviewed in the areas of benefits, retirement and anything else they receive (that) the average worker does not, I have to believe there would be a huge impact on the debt. It is not fair that they are not treated equal to the rest of us Americans. Therein lies their lack of empathy to our needs for pensions, Medicare and Social Security. It isn’t right.
This is not that complicated. Start with rolling back government expenditures (and personnel) to a pre-Obama level. Look at every “grant” that goes from the federal government to the states. Stop at least one-third in value. Then begin to really work on reducing the expenses of federal government to no more than 20 percent of gross domestic product.
—Bob Worden, Penn Yan
Go back to 2008 levels of spending, and the problem disappears. We engineered the bankruptcy of America in two years, from 2009-2010, and we can undo the damage if we have the political willpower to do it. Unfortunately I have little confidence the Republicans really mean it when they talk about the deficit, and I am certain the Democrats don’t. When the history books are written in 100 years, they will look at 2009-2010 as the tipping point in America’s decline.
Let the federal government go over the cliff. Then the cuts will truly happen. Next, immediately pass a new budget that restores cuts made to the military. Then President Romney can propose and Congress can pass the new "Romney-era" tax cuts that mirror the old Bush tax cuts and include permanent reductions to the "death tax." In the meantime, Romney will unshackle business and industry, and millions of people will go back to work in new jobs. The payroll taxes collected from these now working people will contribute mightily to reducing the deficit without raising anybody else's taxes!
—George Thomas, Ogden
The subject of the fiscal crisis is a very complicated issue. One thing for certain is that we cannot expect the same amount of services nor continue to pay as little as we do until the crisis is over. Another thing that would help tremendously is to have more people employed. In that way the revenue stream would be increased. So here are some things that we should do: Revenue increases: 1. Move the tax rates back to the Clinton era and hold them there until the budget is balanced or that a new fairer tax code is implemented. 2. Require people to pay into Social Security, unemployment and Medicare for their entire working career. Require higher wage earners to pay more with no loopholes or exemptions. 3. Aggressively seek streamlining government. By eliminating redundancies, challenging spending, eliminating congressional perks and allowances. Savings: 1. Stop paying subsidies for companies not developing resources on federal lands. 2. Stop subsidizing companies that ship jobs overseas. 3. Stop subsidizing or giving tax breaks to companies who do not produce more than 50 percent local content in their products. 4. Require Congress to have the same benefits and health plans as normal Americans. 5. Eliminate the current wars and stop providing foreign aid to countries that are developed or are enemies of the US. 6. Stop buying weapons that the military does not want but that which a congressman wants. 7. Stop subsidizing energy companies or providing access to federal lands if they do not provide enough energy to stabilize U.S. energy prices at a level reasonable enough to promote recovery. None of these, or any other significant changes, will be enacted before the end of the year. I expect only Band-Aids to be used. These changes will take time to develop and enact. The deficit will not go away overnight like the Tea Party wants. It took 12 years to build the debt. We need reasonable time to get rid of it. But we need legislation that cannot be reversed.
I agree with the Simpson-Bowles commission recommendations as the starting point. This should have been done right after the commission completed about two years ago but the Republicans in congress “just said no,” and that is all they have done since they took power. They have done nothing to help the average American or to foster business. Their only objective was to defeat President Obama. The Republican-led Congress makes me sick! Get off your ass and work together on bipartisan reforms before it is too late!
—Stanley Hilt, lifelong Republican
Our leaders need to work with big business to bring jobs back to the U.S. We need to lower taxes and do a better job of scrutinizing those truly in need. Our leaders need to tighten their belts—no more "free lunch," and work together. And, first and foremost, we need to honor our Constitution!
We should take the politicians to the cliff and give them a lemming training seminar.
—Daniel Mossien, architect
There is a $16.5 trillion debt. The annual deficit is growing by almost $1.5 trillion per year! Grow up, everyone. We are already over the fiscal cliff. The question is, when are we all going to realize it and begin to start climbing back up the cliff. Washington, you guys, all of you, grow up first and start doing your jobs.
The government should approach this no differently than a wise business would or a wise family, for that matter. Reduce expenditures first. To do otherwise assumes that government can successfully operate outside the laws of economics. Government does not deserve a pass on imprudent spending. After all, the only money it has is money it first takes from its citizens. I'm confident most citizens will much more wisely invest and spend their own money than a third —party ever could.
—Mimi Bacilek, president, SuccessBuilders, LLC
I have become interested in and support the work of the Americans for Responsible Taxes organization, which is a “coalition of concerned communities and working families united to repeal the Bush-era tax cuts for the wealthiest, reinstate the estate tax to at least 2009 levels, close tax loopholes, and inform Americans and their elected officials about the importance of responsible tax and budget policies. ART engages in grassroots activism, legislative lobbying, public outreach, and communications work to advance responsible taxation.” Please check out their website (http://www.responsibletaxes.org) if you want to help promote a realistic solution to our fiscal problems without destroying critical government spending. Urge your elected officials from both sides of the aisle to work toward these goals. We can do this.
—Greg Reynolds East Rochester
We have to stop worrying about this imaginary "fiscal cliff" and do what it takes to create jobs.
Increase tax revenue on the top 1 percent. Spending cuts prudently (as has been the case for the last four years), where it is unlikely to affect economic recovery or increase unemployment drastically, and can be proven to be fraudulently or wastefully spent. No earmarks at all. Abolish earmarks. Channel more money to small business and less money to the military/industrial complex.
—Lee Drake, CEO, OS-Cubed Inc.
If I ran my business the way Congress runs the country's business, I would have gone broke years ago: little, if any strategic planning, no cash reserves, little if any cooperation among the inside players and stakeholders, poor service and little consideration for the taxpayers, lousy leadership. It is a pathetic way to run an institution, company or a nation.
—R. Tarantello, Tarantello & Associates
The spending cap is an artificial limit placed on our society for political, and not for economic reasons. It is too disruptive for modern economy.
I'm tired of brinksmanship. Ideologues from both parties draw their lines in the sand and dare their opponents to step over the line. At the same time, we have campaigns awash in special interest money, superPACs delivering “hate” messages while congress and the president “kick the can” down the road. Fiscal policy cannot embrace draconian spending cuts and ignore the need to increase tax revenues. Either one by itself fails. And, yet the lines are still drawn in the sand, and “hate” campaigns are constitutionally OK.
—Wayne Donner, Rush
The truth is that there will always be budget deficits, and the whole debate has become too ideological rather than rational and pragmatic. We need to parse the business and personal components, and reduce the number of deductions and loopholes. We don't need draconian social program cuts, and we should re-evaluate how health care reform is paid for. I like the idea of a single payer, which could bring major reductions in drug costs. Spend more money on strengthening anti-fraud efforts. Military spending should get a zero based budget approach to assess needs and effectiveness every five years. Most important, we need to assess how we treat our returning veterans. It might be better to have all budget expenditures run by a panel of moms and grandmas to see what they would spend money on. When Bob Duffy ran for Mayor, his theme was public safety, education and economic development. Maybe the Congress and Senate should identify similar basic priorities. Including health and support (Social Security) as components of public safety. Force Congress to halt any new spending, until all spending is accounted for. Force payment of debt obligations as the first priority, then whatever costs for direct benefit to all our citizens second. Lowest priorities should be assigned to the military, and "member items" and special interest spending. Finally force a simple up and down vote on each specified priority. If we don't have enough money to meet those priorities, increase taxes on a sliding scale with those making more paying the highest amount to balance the budget.
—Frank Orienter, Rochester
Any business that spends more than it makes is finished. Any business that keeps raising prices (taxes) will lose customers (taxpayers) and will also be finished. Our government is that business but will never go out of business. Why? Because its business is printing money.
—John Malvaso, FSI Systems inc.
Just do it!
A "Simpson-Bowles" type commission should be established both to determine the revenue increases, tax reform, and spending cuts recommendations AND then to implement the changes. The political repercussions of any significant changes are too difficult for Congress to finalize and implement.
—Mike Bleeg Strategic Results
11/9/12 (c) 2012 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email firstname.lastname@example.org.