CBO released its Update to the Budget and Economic Outlook: Fiscal Years 2012 to 2022 today that highlights what Manufacturers have been saying all year, letting the country go off of the “fiscal cliff” is not the way to address our nation’s fiscal problems. In fact, according to CBO, doing so, will very likely “lead to economic conditions in 2013 that will probably be considered a recession and the unemployment rate rising to about 9 percent in the second half of calendar year 2013.” This point underscores something that NAM’s President Jay Timmons has been saying for a while. The moniker “fiscal cliff” is wrong because going over a cliff assumes there is a bottom once you go over. In this scenario, it’s much worse – we don’t know where the bottom will be, when we will hit it, or even if there is a bottom..
The CBO’s update lays out the problem in stark terms and manufacturers hopes this gets policy makers moving. Allowing all of the changes pending in law – the expiration of the 2001 and 2003 tax relief, the first tranche of sequestration, the AMT patch lapsing, steep reductions in Medicare reimbursement rates – to go into effect will create a perfect storm for economic disruption beginning January 1, 2013. On the bright side, CBO estimates that if these changes don’t go into effect, “(t)he economy would be stronger in 2013: Real GDP would grow by 1.7 percent between the fourth quarter of 2012 and the fourth quarter of 2013, and the unemployment rate would be about 8 percent by the end of 2013.”
For those who continue to believe that allowing the “cliff” to hit would reduce the deficit and that alone is enough reason to stay on course – we point to CBO’s own data in rebuttal. CBO states that, “in the last few years of the 10-year projection period, continued growth in spending for retirement and health care programs will cause mandatory outlays to grow faster than the economy reaching 14.4 percent of GDP in 2022, compared with 13.2 percent in 2012.”
In fact, rather than a call to keep heading towards the abyss, CBO’s update should make clear to Congress that the time is now to veer from the calamitous course we are on and extend current tax policies for a year. This allows Congress the time to address comprehensive tax reform and a plan to address the real drivers of our nation’s deficit – entitlements.
Carolyn Lee is senior director of Tax Policy, National Association of Manufacturers.
In her role, Carolyn leads the Institute’s workforce efforts to close the skills gap and inspire all Americans to enter the U.S. manufacturing workforce, focusing on women, youth, and veterans. Carolyn steers the Institute’s initiatives and programs to educate the public on manufacturing careers, improve the quality of manufacturing education, engage, develop and retain key members of the workforce, and identify and document best practices. In addition, Carolyn drives the agenda for the Center for Manufacturing Research, which partners with leading consulting firms in the country. The Institute studies the critical issues facing manufacturing and then applies that research to develop and identify solutions that are implemented by companies, schools, governments, and organizations across the country.
Prior to joining the Institute, Carolyn was Senior Director of Tax Policy at the NAM beginning in 2011, where she was responsible for key portions of the NAM’s tax portfolio representing the manufacturing community on Capitol Hill and in the business community and working closely with the NAM membership. She served as the Director of Legislative and Government Affairs at the Telecommunications Industry Association, Manager of State and Federal Government Affairs for 3M Company, and in various positions on Capitol Hill including as Legislative Director for former U.S. Senator Olympia Snowe (R-ME), and as a senior legislative staff member for former U.S. Rep. Sue Kelly (R-NY).
Carolyn is a graduate of Gettysburg College in Gettysburg, Pennsylvania graduating with a B.A. in Political Science. She resides in Northern Virginia with her husband and three children.
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