Capital Region congressional representatives are calling for various degrees of compromise to avoid across-the-board spending cuts and tax increases at the start of 2013.
The “fiscal cliff” the country is trying to avoid is mostly the result of the expiring tax cuts passed under President George W. Bush and the 2011 failure by a joint Congressional committee, known as the “supercommittee,” to reach a compromise on spending cuts and additional revenues. That supercommittee’s failure prompts drastic spending cuts in military and entitlement spending that are only avoided if a replacement deficit reduction plan can be implemented.
The consensus is that the spending cuts in conjunction with an increase in taxes, with the expiration of the Bush tax cuts and a payroll tax break, would hurt the slowly recovering economy.
According to U.S. Rep. Chris Gibson, R-Kinderhook, there are three options facing legislative leaders and President Barack Obama, who met on Friday to work out a plan before the end of the year.
He said the first option is going over the cliff. “That is unacceptable,” Gibson said, articulating the majority viewpoint.
The ways of avoiding the cliff, he said, are a short-term fix of small spending cuts and revenue enhancements that gets the country into 2013 or a long-term fix born out of some sort of grand agreement.
“[A short-term fix] is not optimal, but it’s better than going off a cliff,” he said of plans to either delay the cliff or avoiding it with piecemeal deficit reduction moves.
His vision for a long-term fix would involved the implementation of the bipartisan Cooper-LaTourette budget, which was introduced in the House of Representatives this spring. It failed to pass but garnered support on both sides of the aisles.
This plan, Gibson said, would slow the growth in government spending to result in $2.8 trillion in savings. He predicted it would also generate $1.2 trillion in additional revenues, even though it would lower tax rates.
Gibson argued that the lower tax rates would benefit the middle class, which reinvests almost all of its money back into the economy.
“This is so important because when you look at our gross domestic product, two-thirds of our economy is consumer driven,” he said.
Gibson also wants to raise revenue by ending tax loopholes that are beneficial only to the rich, like deductions for buying corporate jets and subsidies to oil and gas companies, while protecting tax loopholes like the mortgage tax interest, charitable and health insurance benefit deductions.
U.S. Rep. Bill Owens, D-Plattsburgh, is a little more pessimistic about accomplishing a grand bargain and is setting his sights on passing a farm bill, avoiding draconian spending caps and renewing some of the Bush tax cuts. “I think this is a two-step process,” he said, suggesting long-term problems can be dealt with in the next legislative session.
He is optimistic about the chances of compromising in the short term. “I came back feeling the most positive that I have since 2009,” Owens said. “The atmosphere seems more congenial.”
To avoid the fiscal cliff, Owens said the country can get additional revenue by not renewing the Bush tax cuts for people making $250,000 a year, although he would prefer to set the threshold at half a million dollars. Additionally, he noted the Government Accountability Office found $100 billion in savings if redundancies were eliminated, like having 82 programs involved in teacher quality. And he predicted huge savings if Medicare negotiated its own drug prices and additional components of the Affordable Care Act were implemented.
In total, he said these three areas would contribute $2.5 trillion toward balancing the budget over the next decade.
Owens said the problem with the $1.2 trillion in cuts from the cliff is that there is no discretion. “We want to find other ways to save money,” he said.
Taking the lead
U.S. Rep. Paul Tonko, D-Amsterdam, argued that the message from the 2012 elections clearly indicated the Democrats should take the lead on avoiding the fiscal cliff. He said the re-election of Obama and the growth in Democratic Congressional representation showed the public was supporting raising revenues through increased taxes on the wealthiest one or two percent of the population.
While arguing that a consensus is important, Tonko added that the country is driven by majority rule, no matter how slight.
“Before we cut anything in Medicare, Social Security and education, we need to look at any ways we can do belt-tightening,” Tonko said, highlighting bulk purchasing and ending subsidies to oil companies.
As negotiations continue, Gibson said he will be working with colleagues on both sides of the aisle. He added that some of the hard lines taken by candidates from either party are tantamount to political posturing, as both sides are going to have to swallow some provisions they don’t love.
“I do believe we’ll get an agreement of some kind,” Gibson concluded.