As America nears what many are calling the "fiscal cliff", I believe it's important to understand what the fiscal cliff is, how we got here, how we can avoid going off of it, and if we go off the cliff, what that will mean to families and small businesses already struggling to make ends meet in this fragile economy.
The fiscal cliff is the combination of the biggest tax hike on the American people in our nation's history, and sweeping, indiscriminate defense cuts occurring simultaneously on January 1. The tax hike and defense cuts will only be stopped if President Obama is able to reach a deal with Congress that begins to address the serious fiscal challenges that America faces.
The tax hike will mean less in every American's paycheck effective next month. In 2001 and 2003, President Bush enacted legislation that included an across-the-board tax cut for every tax bracket, reduced the capital gains tax, the marriage penalty, and phased out the "death" tax that, previously, had forced so many families who owned small businesses or farms to sell their assets to pay the tax. These tax cuts expire on December 31st. Additionally, five of the 18 tax increases included in Obamacare begin to take effect January 1. Taken together, these tax hikes are estimated to cost the average family more than $4,000 in 2013. Worse, an Ernst and Young study recently concluded that President Obama's proposed tax hikes could cost 710,000 more jobs.
Because President Obama failed to get a deal with the "Super Committee" last summer to reduce federal spending as part of the deal to increase the debt ceiling, "sequestration" (indiscriminate defense cuts) will occur on January 1. What's most troubling about sequestration is that our national defense will face severe cuts despite only accounting for about 17 percent of total spending. These cuts to our defense will pose significant challenges to our military readiness, and threatens our national security.
America's fiscal health is not good. According to the Congressional Budget Office, tax revenue is up six percent in 2012, and we still find ourselves falling deeper into debt -- $16 trillion and counting. In fact, the federal government is now borrowing 46 cents for every dollar it spends. This type of fiscal policy is reckless and unsustainable. The simple fact is that Americans are not taxed too little not with record high revenue going into the Treasury; rather, Washington spends too much. It is deeply disappointing that President Obama is so focused on raising taxes rather than taking a hard look in the mirror at the federal spending that has exploded since he took office.
If President Obama's policies of attempting to spend America into prosperity -- through the $800 billion Stimulus, trillion dollar Obamacare, and ballooning Food Stamp and Medicaid roles -- were effective, our economy would have recovered by now. It hasn't. And our children and grandchildren are being left with a devastating bill. That's not fair.
In order to address the root problem of America's fiscal challenges, Washington must admit that it has a spending problem. Presidents and politicians from both sides of the aisle have spent our tax dollars frivolously on program after pet project after program for decades. But, the bill has come due. I am hopeful that President Obama will stop the politics of division he has chosen to engage in and realize that America's fiscal problems will not go away until we address Washington's spending problem. It's time for the President to stand up and lead America out of the economic challenges he inherited and has made worse. He should start by admitting that Washington has a spending problem and work with Congress to fix it.