Our nation needs jobs and new revenue, but the critical question is, “How?” Make no mistake, President Obama and Congress have a daunting task ahead.
First, they must understand that our problems won’t be solved by just heaping more taxes on families and small businesses making more than $250,000 a year. Families need to be able to save for their retirement or their kids’ college tuition; small businesses need money to expand and create jobs. If those heavy taxes kick in, our economic woes will go from bad to worse in a hurry.
We heard a lot during the campaign about taxing the rich. But the rich don’t have enough money to solve our problems. Even if you taxed all of America’s millionaires and billionaires at 100 percent of their income — something no one has suggested as yet — you’d only collect enough to run the government for 10 weeks.
The reality is, hiking taxes is counterproductive; it slows economic growth.
The key to creating more jobs — and generating more tax revenue — is economic growth. The size of America’s economy is not finite, it’s not an issue of slicing the pie into ever-smaller pieces or taking slices from some to give to others. We need to grow the size of the pie so everyone has more. More private-sector business activity will create more jobs and produce more tax revenues for government programs.
One of the best ways to grow the economy — and enhance our national security — is domestic energy production. The American Petroleum Institute says that, with the right government policies, we could increase U.S. oil and natural gas production 76 percent by 2030, generate more than 1.4 million new jobs and produce $800 billion in additional tax revenue.
Another part of the solution is to stop spending more than we take in.
According to The Wall Street Journal, the federal government borrowed 36 percent of what it spent last year. Imagine a family with a $40,000 annual income spending $54,400 a year — year after year — blithely letting the credit card debt pile up. Obviously, that would be irresponsible and irrational. But that’s precisely what we’re doing as a nation. So, part of the solution must be to cut our spending and start reducing our debt.
Because of that reckless spending, America’s credit rating was downgraded in 2011 for the first time in history. Ratings firms are warning that it could drop again, depending on what Congress and the president do about the “fiscal cliff.”
The fiscal cliff is the popular shorthand term for the crisis we will face when the terms of the Budget Control Act of 2011 go into effect.
On Dec. 31, 2012, last year’s temporary payroll tax cuts will end, resulting in a 2 percent tax increase for workers. Certain business tax incentives will end, income taxes will rise because of changes in the alternative minimum tax, the Bush tax cuts will end, and the new taxes in President Obama’s health care law will hit.
Before the election, politicians avoided confronting the fiscal cliff. Neither side would budge. Now, it is time to act.
Many people said this was the most important election is our lifetimes. They may be correct. What we do now will have consequences for generations.
Americans are at their best when the chips are down. Throughout our history, we have shown that, if we work together, we have the creativity, ingenuity and strength to succeed.
No more rhetoric. Just do it!
About the Author
Don Brunell is the president of the Association of Washington Business.