Congress leaving on a debt plane
All of this is status quo political maneuvering. But there are two major reasons to believe that it won’t fly this time around. The writing on the wall about the implications of inaction is getting too bright to ignore, and a well-resourced, national, bipartisan campaign has been launched to take the issues straight to the voters in lawmakers’ districts.
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.
This message is starting to be heard more loudly and more clearly across the country. Great credit for the increased awareness is due to dedicated advocates such as former Senator Al Simpson (R-Wyo.) and former Clinton White House Chief of Staff Erskine Bowles, who championed the idea of an “everything on the table” approach and co-founded the Campaign to Fix the Debt.
Senator Simpson and Mr. Bowles, along with former Republican Senator Judd Gregg and former Democratic Governor Ed Rendell, the Campaign co-chairs, have announced that the effort has raised almost $30 million dollars in just over a month, with more coming in, to educate voters and mobilize them to urge lawmakers to get a debt deal done. The Campaign is employing all the tools of modern political outreach, including advocacy in many states and major advertising, media and online programs.
Already, nearly 140,000 concerned citizens across the country have signed the Fix the Debt petition. A growing number of CEOs and current and former public officials also have signed on to support the campaign at the national and local levels.
With this broad bipartisan backing, we hope to increase the noise and heat on the debt issue, in order to urge policymakers to reach a deal based on key principles. Legislation addressing the spending and revenue elements of the fiscal cliff needs to be accompanied by concrete steps toward a long-term debt reduction plan that is credible to the public and to domestic and international financial markets.
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.
MacGuineas is president of the Committee for a Responsible Federal Budget, a bipartisan non-profit organization made up of leading budget experts that is committed to educating the public about issues that have significant fiscal policy impact.
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