Dec. 13, 2012
Americans are rightfully concerned by the specter of the "fiscal cliff" — the large tax increases and spending cuts scheduled to kick in Jan. 1.
According to the Congressional Budget Office, going over the cliff would be a blow to our ailing economy, sending the nation's unemployment rate back to above 9 percent.
Simply canceling all the tax increases and spending cuts would not be good for the economy in the long run. It would not only add even more to our $16 trillion debt, it would also renege on a commitment to spending cuts and debt reduction made in last year's Budget Control Act. This would send a bad signal to credit ratings agencies and our creditors, potentially causing interest rates to spike and sending the nation into another recession.
Neither of these options are acceptable. The reality is that if the two political parties are unwilling to work together on a better solution, we are likely headed to one of these undesired outcomes.
But if the parties are willing to compromise, there is a much better solution. A solution that not only avoids the cliff, but sparks economic growth and job creation by putting our nation on a path to fiscal sustainability.
A Bipartisan Policy Center task force headed by former Sen. Pete Domenici, a Republican, and Alice Rivlin, former White House budget director, a Democrat, estimates it would take $2.8 trillion in debt reduction over the next 10 years to stabilize the debt at 69 percent of gross domestic product.
Read the full op-ed here
Economic Policy Project