Unemployment rose a tenth of a point. Manufacturing slowed. The business climate soured. One of the reasons for this glum economic news is that Congress adjourned last week without dealing with the double-whammy that Fed chairman Ben Bernanke calls the “fiscal cliff.”
Because they fear the deadlock will continue, a large and growing number of companies are putting off planned expansions until the picture clears. At the first of the year the Bush-era tax cuts are due to expire and taxes will rise by $399 billion. At the same time, under a previous budget agreement, federal government spending will fall by more than $100 billion.
A big chunk of the cut will come from defense because that is where the federal government does a significant percentage of its spending.
If Congress continues to do nothing, the one-two punch coming from reduced spending and higher taxes could throw the country back into recession. At the least, economists say, dropping off that cliff will increase unemployment and reduce the growth rate to near zero.
So how does this news strike Congress? Last week our good senators and representatives adjourned for five weeks to go home and campaign. That was their response: Let the country go over that cliff, they had more important things to look after: themselves.
TO BE ACCURATE, it wouldn’t have made any difference if they are stayed in Washington. The country is marching straight toward Bernanke’s cliff because Republicans won’t even talk about letting Clinton-era taxes on the wealthy return and Democrats are just as determined to keep Social Security and Medicare intact. And the division over defense spending is just as unbending.
As Evan R. Gaddis, president of the National Electrical Manufacturers Association, told a New York Times reporter: “It’s totally irresponsible and absolutely insane. The two parties are really dug in. Companies see the writing on the wall and business decisions are now being made on this.”
Irresponsible because liberals and conservatives alike agree that the effect of such a huge tax increase and spending cut coming on the morning of January 1 would stop the recovery and throw additional thousands out of work. Insane because a refusal to deal with things as they are is not a rational response.
INDIVIDUAL VOTERS have a role to play in this drama. The four congressmen and two senators from Kansas are all Republican, all conservative. Each will be out on the streets, peddling their messages, and the representatives will be asking for your vote. When they do, don’t ask them how they think the logjam that is preventing action on the tax cuts and the spending reduction can be broken. Ask, instead, what compromises they favor. Don’t let them off when they tell you its all the other guy’s fault. Remind them that it takes two to tango. Tell them that you don’t go for the my-way-or-no-way philosophy. That kind of thinking got us in the fix we’re in.
Remember, you’re the boss. They work for you and the way things are going right now, they should be fired.
— Emerson Lynn, jr.
