We won. Thanks to our efforts, Barack Obama clinched re-election on Tuesday, and Democrats are on track to gain a net two seats in the Senate, and seven in the House. But despite two years of partisan gridlock and political posturing, control of government remains divided just as it was before Election Day. We cannot afford for the next two years to be as unproductive as the last two. With the election behind us, it’s time for our leaders to get to work and defuse the bomb they’ve been building since they took office: the fiscal cliff.
But what exactly is this “fiscal cliff”? The fiscal cliff is a euphemism for $480 billion in tax increases and spending cuts automatically set to take effect at the start of 2013. It’s a time bomb that Congress has been building since 2010, when President Obama cut a deal with the last Congress to extend the Bush Tax Cuts in exchange for a temporary extension of the Payroll Tax Cut and Emergency Unemployment Benefits that were first enacted as part of the stimulus.
Then came the 2011 debt-ceiling crisis. The newly elected House Republicans demanded that every dollar they increased the debt ceiling by be matched by a dollar in spending cuts. Democrats were able to agree with them on $900 billion in spending cuts over ten years, but could not find the additional $1.2 trillion necessary to raise the debt ceiling through last night’s election. In order to avert default on the debt but still their pledge, Congress created a super-committee tasked with finding another $1.2 trillion in deficit reduction. As a fail-safe, they included a provision that mandated an across-the-board spending cut equally split between defense and non-defense discretionary spending if the committee failed.
Well, it did. The failure of the super-committee means that at the same time as the expiration of the Bush Tax Cuts ($110b), Payroll Tax Cut ($90b), and Emergency Unemployment benefits ($25b), there will also be cuts of $30 billion in defense and $35 billion in non-defense spending at the start of 2013. On top of all that, there are $30 billion in various tax credits and deductions that are set to expire at the same time. A “doc fix” must be passed by the end of the year to delay an automatic 30% cut to Medicare reimbursement rates ($10b). The Alternative Minimum Tax must be indexed ($125b) to keep it from adversely affecting middle-class households. Oh, and we also have to raise that pesky debt ceiling again or risk default and another credit downgrade.
All of these changes to current tax and spending policy are set to occur automatically at midnight on December 31st if Congress does nothing to stop them. While going over the fiscal cliff would cut our deficit in half next year and save us $7.1 trillion over the next ten, it would also cut 3.9% off our GDP growth in 2013–plunging us back into a recession and killing 2.7 million jobs in the process.
Allowing this bomb to detonate next month is not a rational solution to our long-term fiscal challenges, but neither is simply disarming it and doing nothing else. Doing so would mean allowing our debt to grow to double the size of our economy by 2040. Annual interest payments would reach nearly a trillion dollars by the end of this decade. If we refuse to take the necessary steps to get our deficits under control, the money we spend on servicing the debt and paying for past promises will crowd out all other federal spending entirely.
It’s time for Congress to stop playing political games and start enacting serious solutions. We can’t undercut our fragile economic recovery with a sharp fiscal contraction, but neither can we allow our leaders to bury our generation under a mountain of debt. We are the ones who are disproportionately affected by this debt, and so we are the ones who need to be disproportionately vocal about getting it under control. It’s up to us to demand action.
To learn more about the national debt and how you can get involved in the fight for fiscal responsibility, check out UpToUsAU.org.
Powered by Facebook Comments