New Castle News

Editorials

October 12, 2012

Our Opinion: Action needed in Washington to avoid economic pain

NEW CASTLE — A term you’re likely to hear increasingly in the coming months is “fiscal cliff.”

It will undoubtedly play a role in the general election campaign, but may become even more pronounced after the voting is over.

That’s because the fiscal cliff is a real issue. It refers to the mechanism in place that will lead to significant tax increases and spending cuts in 2013.

Earlier this year, as part of an effort to craft a budget agreement, Congress authorized a painful alternative if Republicans and Democrats failed to reach a deal. That was the cliff, and conventional wisdom said the two parties would deal rather than face public wrath from the consequences of this penalty.

While the impact would vary, the Tax Policy Center — a Washington-based research organization — calculates that the average family would see its tax bill rise by $3,500 a year and its income drop by 6.2 percent as a result of the scheduled changes. The goal here is to reduce the annual federal deficit by a half-trillion dollars.

It’s the sort of penalty on citizens any politician would dread.

However, conventional wisdom failed to take into account the poisonous and ideologically divided atmosphere in Washington these days. Rather than reach a compromise toward a gentler approach to deficit reduction, Congress instead opted for the fiscal cliff.

And it’s a move economist predict will lead to another recession if it’s implemented.

Of course, the cliff can be avoided — if Congress acts after the election. There is some thinking that voting will create a resolution to the logjam in Washington, but that may be a bit optimistic. Statistically, the odds are the divided government will persist in the nation’s capital.

So instead of using the cliff as a crude tool to forge a compromise, lawmakers may instead leap right over it, taking the American people with them.

On the other hand, let’s not forget Congress’ propensity for kicking the can down the road. Faced with the immediate consequences of the fiscal cliff, Democrats and Republicans may agree to craft a delay in the cuts and tax hikes — a move that ultimately resolves nothing.

There are a couple of points worth making here. One is that the fiscal cliff, as dramatic as it is, would not come close to balancing the federal budget. That alone sends a clear message that Washington must act to get its fiscal house in order.

But at the same time, there are real worries that drastic actions would lead to a recession in a fragile national and world economy. This speaks of the need for meaningful compromise. It’s what Americans must demand of their lawmakers.

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