Hundreds of key business groups, local and national, are chiming in this week on the looming “fiscal cliff” that could rock the nation’s economy, urging Congress and the president to come together and avert a calamity that will lead to more uncertainty and less hiring for businesses.
In a letter to President Obama and each member of Congress, more than 300 organizations, including the Fairfax, Loudoun and Prince William chambers of commerce, are pressing Congress to take immediate action to skirt the “potential crisis” primed to hit Jan. 1, 2013, if a deal isn’t struck.
The term “fiscal cliff,” coined in this instance by Chairman of the Federal Reserve Ben Bernanke in February, refers to a series of laws and measures taken by President Obama and Congress to begin reducing the nation’s federal deficit, currently sitting at more than $16 trillion. Sequestration, or automatic, across-the-board cuts, are set to kick in at the start of 2013, a measure that will cut heavily to national defense, which accounts for a large chunk of the budget affected by the cuts.
It has been estimated that sequestration could cut more than 200,000 jobs in Virginia, which holds strong ties to federal defense jobs.
“Failure to act on the looming year-end tax increases would yield the largest tax increases in American history coupled with draconian, ill-designed, across-the-board discretionary spending cuts,” states the letter. “Economists from across the political spectrum warn that such tax increases and spending cuts would have a devastating effect on a still sputtering U.S. economy, quite possibly returning it to recession.”
Though the letter paints circumstances already expressed by most financial experts — and many politicians — business leaders hope a coalition representing various industries from every corner of the country will nudge Congress into action.
Included in the recommendations to immediately avoid the “cliff” are: extending all of the 2001 and 2003 tax rates (including current marginal rates, dividend and capital gains rates and estate tax relief) for all taxpayers; extending expired and expiring business tax provisions; providing alternative minimum tax relief; and finding more targeted spending cuts as opposed to the across-the-board cuts.
Tony Howard, president and CEO of the Loudoun County Chamber of Commerce, said the letter essentially is asking two things: first, avoid the immediate business trauma of sequestration and tax hikes by striking a deal before the end of 2012; and second, once the new Congress and the next presidential term begins 2013, commit to tackling comprehensive tax reform and develop a long-term plan to address America’s excessive spending, notably entitlements.
Howard credited the current situation to “the failure of our national leaders to reach a compromise.” He expressed reserved optimism that Congress would find a way to avoid the “draconian program cuts.”
“They’ll find a way to kick the can down the road,” he said. But, short term action is not a substitute for long-term fundamental fiscal reform, he added.
In a best case scenario, Howard predicted the economy will continue to see modest improvement through 2013 and 2014, and, hopefully, a robust economy will return by 2015, he said. Howard referred to the current period of job growth, which has been 100,000 to 150,000 new private sector jobs per month, as the new normal. Those modest gains, however, have done very little to reduce unemployment, which has rested just above 8 percent in 2012.