Published on -11/20/2012, 9:59 AM
America is scheduled to reach the so-called fiscal cliff by Dec. 31. That is the date Congress imposed on itself by law to reach agreement on deficit reductions, or let automatic spending cuts take place and current tax breaks expire. And in uniquely Washington fashion, the task needs to be accomplished during a lameduck session.
The deal-makers remain basically the same after the Nov. 6 election. The House still belongs to Republicans; the Senate remains under Democratic control. Gone, however, is the motivation of certain representatives to ensure President Barack Obama is a one-term president. That "job No. 1" was a failed mission as the president was re-elected easily.
No definitive mandates are to be read from the election results. Well, unless you count expectations for politicians to do the work they're elected to accomplish.
That work does not include purposefully pushing the country back into recession, which is what most economists believe will happen if we go over the fiscal cliff. The combination of higher taxes and across-the-board spending reductions will pull half-a-trillion dollars from a still-fragile economy next year alone.
Compromise is needed.
Whether that happens depends on the mettle of the men and women we entrust to run the country. The same chasm separating the nation's population divides Capitol Hill as well. Politicians need to step above party and incessant posturing for their own re-election efforts -- and get something meaningful done.
Tax rates for the rich appear to be the most controversial issue. Obama and the Democrats insist those households making more than $250,000 a year should pay more. Republicans believe that higher tax burdens on the "job creators" will be bad for the economy. Further complicating the matter is that most GOP members have signed pledges never to raise taxes.
Both sides agree spending needs to be reduced, although again there are differences in priorities. Democrats need to understand Social Security and Medicare require restructuring. Republicans need to understand military spending must go down. We believe some of the fiscal realities are so self-evident, agreements will be reached. Not easily, of course, but it's possible.
The tax issue will prove much more difficult, as one of the GOP's primary talking points and rallying cries is baseless. The nonpartisan Congressional Research Service analyzed top marginal and capital gains tax rates for the past 65 years and discovered no correlation with economic growth. None.
When tax cuts are introduced, the richest Americans are the least likely to spend extra money. Instead, they save it or invest it offshore. The poorest Americans are the most likely to spend any transfers the government offers.
Simply put, lower marginal tax rates for the wealthiest has no effect on economic growth or job creation. It does, however, have an effect on income disparity.
Such statistical facts were not brought to the nation's attention because Senate Republicans persuaded CRS to withdraw the report. Not because the facts were wrong, but because they didn't fit the party narrative.
Such burying of heads into sand simply must end. Once Congress is dealing with factual information instead of rhetoric, this impasse should dissipate and the fiscal cliff will be avoided. Let truth and common sense prevail.
Editorial by Patrick Lowry