Sunday, December 8, 2013
By WILLIAM CHAPMAN
Your Nov. 11 editorial ("Senators should listen to voters on taxes") was off base in implying that allowing the Bush-era tax cuts on the wealthy to expire will avoid the $600 billion cliff.
The cliff isn't so much the possible $600 billion that President Obama agreed to. The real cliff is the soon-to-be reached debt limit that Obama insisted on, which will be reached shortly after he is sworn in for his second term. Deficit projections from both the White House and the Congressional Budget Office show $1 trillion-plus budget deficits for the next decade given current spending rates. The only two things that can slow or reverse these huge deficits (and the resulting national debt) are increased taxes and reduced spending.
From all indications, the sequestration agreement will go into effect Jan. 1. This is a good thing in that it will actually reduce federal spending by $300 billion. Simple math would predict that the $1 trillion deficit (round numbers) will be reduced to $700 billion. The projection of a $600 billion tax increase (if all Bush-era tax cuts are allowed to expire) will further reduce the deficit to $100 billion (again, simple math).
Those two adjustments to the federal budget will result in a much better position for the U.S. economy going forward. Both Obama and the Republican leaders in Congress have stated very loudly that they want to reduce the deficit. Obama has told us repeatedly that the tax rates of the Clinton years resulted in balanced budget projections when Clinton left office. And the Republican leadership has constantly called for reduced spending. This has to be the best of both worlds.
William Chapman is a resident of Rockport.