In the news lately, you may be hearing about what economists have been calling the coming "Fiscal Cliff." Unless Congress acts, on January 1, 2013, every American will experience a perfect storm of unprecedented tax increases and significant cuts to spending across the board, on everything from defense to Medicare. Most of the pain will be felt on the revenue side of the ledger, with a whopping $500 billion in tax increases in just one year alone. Tax rates in every bracket will increase, and some credits and deductions, like the child tax credit and student loan interest deduction, will be significantly reduced or eliminated. Spending would only be reduced by $150 billion in comparison.
This week, the Congressional Budget Office estimated that the economic impact of doing nothing to address this massive tax increase will be significant. In fact, if Congress fails to act before January 1, they estimate the American economy would actually shrink by 1.3% in the first half of 2013. This means that we would throw our economy back into recession just by poor budget policy alone. Knowing this, it is unacceptable that we are kicking the can until after the election.
In this time of economic difficulty, raising taxes on American families and job creators is not an option if we want to put people back to work and put our nation back on the track to fiscal sanity. One step in the right direction would be to enact a fiscally responsible budget for the federal government, but Senate Democrats have not passed a budget in over 3 years. Also, last week, I joined other Senators in sending a letter to Majority Leader Reid urging him to allow the Senate to act quickly to prevent our economy from reaching the "fiscal cliff." His response was less than encouraging, but I remain convinced that unless action is taken soon we could do serious damage to our economy and the American people that could have devastating, long-term effects.