The latest discouraging economic news provides a sobering reminder of exactly what is at stake when Congress reconvenes to address the "fiscal cliff" issues at the end of this year. The most recent economic growth report shows almost no growth to speak of. At a weak 1.3 percent for the quarter, the economic growth rate showed a decline from the previous quarter's 2 percent growth and is well below the 1.7 percent growth that had been projected. Additionally, demand for durable goods plunged by 13.2 percent in August with much of the decrease due to weak demand in the airplane and automobile sectors. While the weekly unemployment numbers were better than expected, all other economic indicators show an economy that is not growing nearly fast enough to replace all the jobs we've lost. To significantly reduce our 8.1 percent unemployment and put 23 million people back to work, economists say we need economic growth of at least 3 percent.
This bleak economic outlook is reflected in the experiences of employers and business leaders. A number of surveys show growing pessimism that indicates the job market may not improve any time soon. A poll conducted by the National Association of Manufacturers (NAM) and the National Federation of Independent Business (NFIB) found that 67 percent of small business owners and manufacturers do not believe there is enough certainty in the market to allow them to expand their operations or hire new workers. Almost seven in ten believe the Obama administration's regulatory policies have hurt small businesses and manufacturers. The environment is so bad that 55 percent of surveyed business owners say they would not start a business today while 54 percent believe China and India are more supportive of small businesses and manufacturers than is our government.
The actions Congress takes to deal with expiring tax provisions in December will influence the job market. Whether that impact is positive or negative depends on the White House. House Republicans have already voted to extend the tax cuts that expire on December 31, but unless President Obama signs the tax cuts into law, taxes could go up for every family and business in every tax bracket.
We've been here before. When the same tax rates were originally scheduled to expire in December 2010, President Obama agreed that raising taxes in a slow economy would be a foolish decision that would hurt job creation and reluctantly consented to expand all the tax cuts. If raising taxes was a bad idea in 2010, it's arguably a worse idea now that we've had an additional two years of 8 percent unemployment and almost non-existent economic growth. Yet the president insists on raising taxes on earnings above $200,000 in complete disregard of the undeniable fact that these tax hikes would hit the 50 percent of small business income that is taxed at individual rates. According to accounting firm Ernst and Young, 710,000 Americans would lose their jobs and wages would fall by 1.8 percent if these tax increases are adopted.
Democrats and Republicans may never agree on tax policy, but surely we can agree that raising taxes in the current economic environment would be disastrous. Each party's philosophy on taxes should take a backseat now in favor of an all-hands-on-deck approach to jumpstarting the sluggish economy. If we disregard partisan rhetoric and just heed what the economic indicators and our business leaders are saying, it is clear that President Obama should cooperate with congressional Republicans to prevent a tax hike in December.