Why the Fiscal Cliff Vote Will Have a Devastating Impact on the Economy by Bobby Scott
Late in the evening on New Year’s Day, Republicans and Democrats slapped each other on the back as the House of Representatives passed the “fiscal cliff” deal, congratulating one another on what we can achieve when we all work together. The deal was made in order to avoid the automatic across-the-board spending cuts, known as sequestration, and extend the “middle class” Bush-era tax cuts.
Sequestration was not averted; it was just delayed two months. The middle-class tax cuts were permanently extended for family incomes up to $450,000 per year, but I expect that when many find out how their tax cut will be paid for, most would have preferred not to get any tax cut at all.
Few in Washington are willing to acknowledge that this bipartisan “achievement” will have a long-term, devastating impact on our nation’s budget and economy.
Twelve years ago, our nation was facing a projected $5.6 trillion surplus, the prospect of paying off our national debt, and the potential of shoring up Social Security and Medicare. Instead, Washington squandered that opportunity by enacting the Bush tax cuts without offsets, fought two wars on the nation’s credit card, and passed a prescription drug benefit without paying for it.
These policies, combined with the effects of the recent recession, have contributed to annual $1 trillion budget deficits. The largest contributor to our deficits, however, has been the Bush-era tax cuts. Instead of surpluses and paying off our debt, our national debt has grown to more than $16 trillion.
Since a majority of these tax cuts have now been made permanent by the fiscal cliff deal, responsibly solving our deficit problem is now much more difficult than it would have been if we had just allowed these tax cuts to expire as scheduled.
While I do not endorse all of their recommendations, the Simpson-Bowles Fiscal Commission set a $4 trillion, 10-year deficit reduction goal, which most experts agree would be enough to get our fiscal house in order and put our nation on a more sustainable fiscal path. With that deficit reduction goal in mind, I voted against the fiscal cliff deal, because you can’t begin a serious deficit reduction discussion with tax cuts that add a staggering $3.9 trillion to our deficit with no plan to pay for it.
With this deal, there are now very few options available to Congress to achieve the deficit reduction goal without significant cuts to Social Security and Medicare.
The truth is, we cannot offset the total cost of this deal by only cutting discretionary spending, especially in light of the fact that non-defense discretionary spending is already at a 50-year low as a percent of GDP.
Additionally, nearly every member of Congress agrees that sequestration would be devastating. This near-unanimous opposition to sequestration demonstrates the problem: If we cannot withstand $1 trillion in across-the-board cuts, then how can we ever find $3 trillion or $4 trillion in spending cuts?
So by virtue of the very size of this tax cut, the likely inability of Congress to approve new revenues, and the limited cuts we can make in discretionary spending, it is an arithmetic certainty that Congress will have to cut Social Security, Medicare, Medicaid, education, transportation and other vital programs of the social safety net in order to achieve our deficit reduction goal. This is the reality that we will be faced with when Congress seriously attempts to reduce the deficit in the next few months.
Some of these cuts are already being discussed. For example, changing the way Social Security cost-of-living adjustments are calculated (referred to as “chained CPI”) and raising the eligibility age of Medicare were both discussed during fiscal cliff negotiations between the president and House Speaker John Boehner.
Responsibly reducing our budget deficit requires making tough, unpopular choices. By agreeing to a deal that only cuts taxes, we did not make any tough choices. Instead, we passed a plan that does nothing to reduce our deficit and in fact adds $3.9 trillion to our deficit over the next decade. This makes the task of responsibly reducing our deficit all the more difficult and makes it much more likely that seniors, people with disabilities, students and our most vulnerable communities will bear the greatest burden when Congress eventually decides to pay for these tax cuts.
Robert C. “Bobby” Scott is serving his 11th term representing Virginia’s 3rd District in the U.S. House.