The Fiscal Cliff

The Fiscal Cliff
Congressman Tom McClintock
House Chamber, Washington, D.C.
December 12, 2012

Mr. Speaker:

To understand the federal budget mess and the so-called fiscal cliff, it’s important to remember three numbers: 39, 37 and 64.

Thirty nine percent is the combined increase of inflation and population over the last ten years.   Thirty nine percent.

Thirty seven percent is the increase in revenues during the same period.  That’s despite the recession and tax cuts.  Not quite keeping place, but pretty close.

Sixty four is what’s killing us.  Sixty four percent is the increase in federal spending in that period.  That’s nearly twice the rate of inflation and population over the last ten years.

The spending side of the fiscal cliff is the so-called sequester: automatic cuts in federal spending.  To hear some tell it, these cuts will mean the end of western civilization. 

Hardly.  After a 64 percent increase in expenditures this decade, the sequester doesn’t actually cut spending at all: it simply limits spending growth next year to about a half a percent.

I opposed the budget deal that created the sequester last year because it fell woefully short of what Standard and Poors clearly warned was necessary to preserve the nation’s triple-A credit rating.  Sadly, that fear was born out.  But now, the sequester is all we have. 

It’s true that defense takes the brunt of it, but does our defense spending today really need to be higher – inflation adjusted -- than it was at the height of the Vietnam War, when we faced down the Soviet Union and had 500,000 combat troops in the field?  

The sequester isn’t stepping off a cliff – it’s taking one step back from the cliff. 

The tax increases, however, are a different matter.  Without intervention, the federal tax burden will balloon 21 percent at the stroke of midnight on New Year’s Eve, taking somewhere between two and three thousand dollars from an average family.  This summer, the House passed legislation to protect our nation from such a calamity, but Mr. Obama vowed to veto it and the Senate blocked it.

Instead, Mr. Obama tells us that he will veto any plan that keeps taxes from going up on those very wealthy folks making over $200,000, who, he says, need to pay their fair share.

(I suppose fairness is in the eye of the beholder.  The top one percent earns 17 percent of all income but pays 37 percent of all income taxes.  But that’s beside the point).

The fine point of it is that a lot of those very wealthy folks making over $200,000 aren’t very wealthy and they aren’t even folks: they’re 1.3 million struggling small businesses filing under sub-chapter S.  Our small businesses produce two-thirds of the new jobs in our economy.  

This battle IS very much FOR the middle class.  The Congressional Budget Office estimates that Mr. Obama’s tax increase on the so-called wealthy will actually throw some 200,000 middle and working class families into unemployment.  Two hundred thousand.  And that’s the optimistic estimate.  An independent analysis by Ernst and Young puts that figure at closer to 700,000 lost jobs.   

That’s because the President’s taxes would slam 84 percent of net small business income – that’s precisely the income used to support and expand the labor force.   

In their blind pursuit of an “eat the rich” ideology, Mr. Obama and his acolytes are imposing a policy that would utterly devastate hundreds of thousands of middle class families who depend on the jobs these small businesses provide. 

And for what?  To wring enough money to fund Mr. Obama’s spending spree for a grand total of eight days.  It’s telling that three-fourths of the new taxes he has proposed would be used to finance the new spending that he has also proposed. 

Republicans don’t want to see taxes go up on anyone, period.  We don’t want to see this government willfully throw hundreds of thousands of Americans out of work by this policy. 

The President obviously believes that in the 11th hour, Republicans will have no choice but ultimately to protect as many taxpayers as we possibly can, since the only alternative will be tax increases on everyone, including the job creators.  He may be right.   

But that would mean a bleak and bitter new year for all those families who will watch helplessly as their jobs evaporate before their eyes. 

Let us pray the President has a change of heart before setting this calamity in motion. 

# # #  

 

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