The past several weeks have been quite momentous.
First, our employees felt the effects of Hurricane Sandy, which caused devastation to New York City and the Long Island suburbs where our offices are located. Power outages, flood damage, and gasoline shortages, caused by disruptions in the supply chain, took their toll on us as well our readers and clients in the nation’s Mid-Atlantic region. As we head into the middle of November, we are hoping for a return to some sense of normalcy.
Second, the nation has re-elected Barack Obama for a second term as President, although the election process showed a deeply divided nation.
Nevertheless, some economists say it is necessary for the nation to “fall off” this cliff in order to stop the economic “hemorrhaging,” as referred to by New York State former Budget Director Peter Goldmark. Let the Bush-era tax cuts expire until the federal budget is balanced, he advises. Make the necessary federal spending cuts, raise taxes on the wealthiest 20 percent of Americans, and raise corporate taxes, he says to the chagrin of many. That extra revenue could be spent on investment in infrastructure and development of a smarter power grid — well we know firsthand how important that is. In fact, our article this month on assessing the “intelligence” of your location’s power grid couldn’t be timelier.
Other economists — as well as the National Association of Manufacturers — believe the nation will slide back into recession if corporate taxes are increased and federal spending is cut. But on an individual level, Americans have been shrinking their debt and saving more. Isn’t it time for the federal government to get its fiscal house in order too?
Republicans and Democrats must come together to solve this problem. Are Republicans willing to offer a deal to stabilize the federal debt if Obama abandons take hikes? New revenue could come from rewriting the Internal Revenue Code to increase tax collections without raising tax rates, according to a former senior aide to House Ways and Means Committee Chairman Dave Camp(R-MI.). “That’s the solution to the Rubik’s Cube,” says Jonathan Traub of Deloitte Tax LLP. “The President wants additional revenues. Republicans don’t want higher tax rates.”
One thing is for sure: All this uncertainty about what’s to happen as we near year’s end tax and budget deadlines is causing business to be jittery and put expansion and investment plans on hold. “The fiscal cliff has forced manufacturers to plan for a future in which business is down and their tax bills are up,” explains Jay Timmons, president and CEO of NAM. Let’s hope both parties work to resolve the issue as quickly as possible in order to cushion the predicted fall.