The nonpartisan Congressional Budget Office (CBO) yesterday confirmed what manufacturers have been saying for a long time: cancelling the spending cuts and tax increases set to go into effect on January 1, 2013, will stimulate much-needed economic growth and job creation.
The CBO’s report , “Economic Effects of Reducing the Fiscal Restraint that Is Scheduled to Occur in 2013,” concludes that ,if Congress derails the spending cuts under sequestration and extends current tax relief provisions, GDP will grow at a 4.4 percent rate in 2013, raising employment by two million jobs, on average. Conversely, doing nothing and allowing some $607 billion of across-the-board spending cuts and tax increases to hit our economy will stop our economic recovery in its tracks, sending the country back into a recession.
In fact, CBO estimates that if we fall off the $600B fiscal cliff, the economy will contract by 1.3 percent in the first quarter of 2013 and overall growth in 2013 will be about 0.5 percent. As CBO does point out, though, the short-term benefits of avoiding the fiscal cliff doesn’t eliminate the need for policy makers to make a serious effort to address our nation’s long-term debt and deficit challenges, a position shared by manufacturers. Congress and the Administration need make the hard decisions on tax and entitlement reforms and spending policy to put the nation on a long-term path to growth and job creation.
NAM members have long held that the U.S. tax code represents a drain on our economy and any long-term plan to address our nation’s fiscal challenges should include comprehensive reform of the tax code that encourages job creation, investment and growth.