MY VIEW: Maya MacGuineas September 2012
CRFB President Maya MacGuineas writes in today's The Hill that as Congress returns home for another recess, there is plenty of evidence that continuing to kick the can down the road will no longer work. While it may seem like good politics to avoid putting off the tough choices we need to get our budget back on a sustainable path, the news from the credit agencies and the looming fiscal cliff show that punting on this issue will have real consequences.
Alarm bells about the fiscal cliff are going off with increasing frequency. Last week, Moody’s Investor Service, the major ratings agency, warned that the U.S. could lose its sterling credit rating if Congress doesn’t reach a deal to replace the abrupt, mandatory spending cuts and tax increases that are set to take effect in January with a plan to stabilize and ultimately reduce the debt as a percentage of GDP. A ‘kick-the-can’ solution that simply delays the abrupt tax increases and automatic spending cuts for a few months would leave this uncertainty hanging over an already struggling economy.
Business leaders are also weighing in about the urgency of action. As the New York Times reported last month, “A rising number of manufacturers are canceling new investments and putting off new hires because they fear paralysis in Washington will force hundreds of billions in tax increases and budget cuts in January, undermining economic growth in the coming months.”
It would be a mistake for policymakers to take these cues as a reason to simply institute a short-term fix that avoids the fiscal cliff and tees up another crisis next year. The fiscal cliff is simply a curtain raiser on the bigger issues we will likely face with the debt, including rising inflation, dollar devaluation, disappearing resources for public works, and a growing dependency on China. What we need is to replace the fiscal cliff with a long-term, bipartisan deal on the national debt that alleviates economic uncertainty and increases confidence that our leaders are up to the task of addressing the greatest fiscal challenge of our lifetime.
The uncertainty surrounding the fiscal cliff and our unsustainable debt path can be eliminated while setting a clear path for fiscal policy going forward. But it is going to require lawmakers to look at the entire budget and make the difficult decisions.
Such a plan must be bipartisan and comprehensive, addressing all parts of the budget, including cuts in low-priority spending, reforms of entitlement programs to reduce the growth of health care entitlements and make Social Security financially sound, and pro-growth tax reform which broadens the base, lowers rates, raises revenues, and reduces the deficit. It must also be large enough to stabilize and ultimately reduce the debt, but be implemented gradually to protect the fragile economic recovery and to give Americans time to prepare for the changes in the federal budget. Lastly, the plan should be conducive to long-term economic growth, protect the vulnerable, include credible enforcement mechanisms to ensure that the promised deficit reduction is achieved, and leave the next generation better off.
We are running out of time and rhetoric is of little value at this point. We need action.
The full op-ed can be found here.
"My Views" are works published by members of the Committee for a Responsible Federal Budget, but they do not necessarily reflect the views of all members of the committee.