By Congresswoman Jean Schmidt
The chairman of the Federal Reserve tells Congress that reducing unemployment in the United States is "frustratingly slow." We already knew that. The national unemployment rate has been above 8 percent for more than three years.
Unfortunately, Fed Chairman Ben Bernanke also says the economic recovery -- as weak as it has been -- appears to be losing steam.
Now is not the time to raise taxes on anybody. But, that's exactly what President Obama is prescribing for our ailing economy.
Tax cuts enacted in 2001 and 2003 are set to expire at the end of this year. If Congress fails to act, tax rates would revert to their pre-cut levels. The net effect would be a $4.3 trillion tax increase over the next decade. The nonpartisan Congressional Budget Office (CBO) estimates that such a tax increase would shock the economy and push the United States back into a "shallow recession."
These looming tax increases, along with the pending budget cuts called for under the Budget Control Act, constitute the "fiscal cliff" that has economists wringing their hands.
The right thing to do would be to extend all the tax cuts and let the economy stabilize. The president wants to pick winners and losers. He wants some people's taxes to increase and others' to go down.
Recently, the accounting firm Ernst & Young ran the numbers on his plan. It found that the long-term effect of increasing taxes would be to siphon $200 billion out of the economy -- and cost 710,000 jobs. It also found that, in the long run, capital stock and investment would decline and "real after-tax wages would fall by 1.8 percent, reflecting a decline in workers' living standards relative to what would have occurred otherwise."
Far from forcing the rich to "pay their fair share," the president's plan would actually increase taxes on job creators and small businesses. Many of them operate as "pass-through entities" whose taxes are counted as the owners' personal income. According to the Ernst & Young report, "these businesses employ 54 percent of the private sector work force and pay 44 percent of federal business income taxes." Additionally, "more than 20 million workers are employed by (pass-through) businesses with more than 100 employees." The fact is that increasing taxes on small businesses isn't going to increase employment or grow the economy.
The majority in the House has pledged to provide an opportunity to extend the 2001 and 2003 tax cuts before the start of the August recess. I hope the president will support that effort. We need to push the economy forward, not shock it back into a shallow recession.