When the clock strikes 12 on Dec. 31, a perfect storm of politics will commence. For months, Americans have been anticipating the fiscal cliff, which comes at a time that cannot possibly be deemed more inconvenient, as political gridlock plagues Congress and the economy lies at a virtual standstill. President Barack Obama is intent on letting these tax cuts expire for the nation’s top earners, raising taxes on the nation’s job creators and much needed investors.
This is not surprising, as our president has consistently demonstrated that his knowledge of a functioning American economy wouldn’t fill a novelty shot glass. Hopefully, it will only take a few more failed investment projects like Solyndra for the public to see that the president is unfit to handle the fiscal cliff, as demonstrated by the convergence of the end of temporary payroll tax cuts, the beginning of expenses related to “Obamacare,” the sequestration cuts to defense and Medicare and most importantly, the expiration of the major 2001 to 2003 era tax cuts.
The president’s proclivity for massive tax increases is unconscionable considering our economic status. Even Democrats of the likes of former President Bill Clinton have said that raising taxes during a recession is a recipe for disaster. The president seems to operate under the false illusion that we can tax and spend our way out of a recession.
One would simply have to cross the Atlantic to see what becomes of unregulated government spending and a severely inflated market. Policies such as the president’s proposed raise of taxes on earners of more than $250,000 a year as well as his proposed capital gains tax hike are akin to building an enormous wall in between people with money and innovative upstart business owners who happen to need that money.
Obama’s policies discourage investment, which prevents business creation, which then prevents new jobs from being created. As a cavalier of the private sector, former Gov. Mitt Romney has the firsthand experience of what can happen when an institution has the appalling fiscal discipline on which Obama is currently piloting this nation.
According to economist Michael Feroli, $280 billion would be pulled out of the economy should former President George W. Bush’s tax cuts be allowed to expire. Experts estimate that this, combined with the looming sequestration, will prompt a 0.5 percent reduction in growth of gross domestic product in the first quarter of 2013 followed by a 0.3 percent reduction in the second quarter from the effects of the fiscal cliff.
The Congressional Budget Office estimates the unemployment rate would soar above 9 percent. You can also count on foreign investment as well as the bond market to take steep declines.
Romney has a concise plan to generate sufficient revenue without making massive cuts to defense or pillaging Medicare. He would cap spending at 20 percent of GDP. This number is close to the tax revenue amount generated by a healthy economy, thereby preventing more unnecessary borrowing.
Romney would repeal “Obamacare,” in which tax increases on the middle class and cuts to Medicare spell disaster for any hopes of a thriving economy. He would repeal the David-Bacon Act, which forces the government to pay above-market salaries raising public projects’ costs by 10 percent, and the Dodd-Frank Act, which represents a major regulatory road block in the private sector.
These reforms – Romney’s reforms – coupled with across-the-board tax cuts that will grow the tax base and encourage investment in the private sector will re-energize the American economy and put the middle class back to work.