The time is now because we are standing on the edge of the “fiscal cliff.” At year’s end, we face abrupt, nearly across-the-board spending cuts totaling almost $1 trillion over the next ten years. The effect of these cuts is coupled with the expiration of numerous tax policies, including the Bush era tax cuts and the Obama payroll tax cuts. The non-partisan Congressional Budget Office estimates that if we fall over the cliff come January 1, the economy will contract by an annual basis of 3.9 percent in the first quarter of 2013 – and unemployment will spike. Already, fear of the cliff – and of Washington politicians doing nothing to avoid it – has led to businesses putting off new hiring and investments.
But that’s just the immediate problem. Over the long-term, our national debt – now at $16 trillion – is simply unsustainable. Indeed, our rising debt threatens our standard of living and the resources we will have in the future. Simply servicing the bloated debt will soon lead to annual trillion-dollar interest payments and will eventually result in interest rate hikes that will make it harder for average people to borrow money to buy a home or a car.
Many politicians talk about cutting “domestic discretionary spending” and “waste, fraud and abuse” as an answer to our deficit challenge. But those items are too small a portion of our federal budget to offer a solution. Instead, we need a balanced, comprehensive approach that will look to both sides of the ledger – spending and revenue. And, more importantly, on the spending side we need to focus on the drivers of our debt, entitlement programs. While raising revenue, it is best to also reform our tax code to eliminate or reduce economy-distorting deductions and loopholes. Lastly, the right kind of long-term debt deal must make sure to protect our fragile economic recovery – meaning these large-scale spending and revenue measures must be phased-in over time.
Getting politicians of both parties to agree to a debt-reduction program that accomplishes all of these goals may seem like a herculean task. But my experience tells me it can be done. There is much consensus already in place for what we need to do. The Simpson-Bowles Commission report and the Rivlin-Domenici plan both prove that there can be bipartisan support for a comprehensive approach to this fiscal challenge. With the “fiscal cliff” looming, I truly believe that the petty politics of the moment will soon give way to the urgency of action.
As the Presidential debates continue, I certainly hope that President Obama and Governor Romney lay out concrete plans to address the debt and avert both the near-term “fiscal cliff” and the long-term debt crisis. But if they don’t, voters need to let them – and Congress – know that the time is now for serious action. You can do this by adding your name to the 225,000 who have already signed the petition at FixTheDebt.org, which urges passage of a comprehensive deal to create a short- and long-term fiscal fix.
My own experience in Congress makes me confident that we can get this done.
Penny served as the representative for the 1st Congressional District of Minnesota in Congress from 1983 to 1995. He is co-chair of the Board for the Committee for a Responsible Federal Budget and a supporter of the Campaign to Fix the Debt.