Letter Regarding America's Impending Fiscal Cliff
AN OPEN LETTER TO THE MEMBERS OF THE UNITED STATES CONGRESS:
The U.S. Chamber of Commerce, the world’s largest business federation, representing the interests of more than three million businesses and organizations of every size, sector, and region, calls on Congress to work with the President to swiftly enact legislation that appropriately addresses America’s impending fiscal cliff. Failure to address the automatic tax increases and spending cuts would reduce economic growth and could jeopardize economic recovery. At the same time, we urge you to be mindful of the absolute necessity of addressing the long-term fiscal imbalance through comprehensive tax reform and fundamental entitlement reform.
It is the duty and the responsibility of Congress and the administration to promote the common good by addressing the problems facing the U.S. economy in both the short and long terms. While election years are not generally noted for the passage of bi-partisan and forwardlooking legislation, the problems confronting the American economy are not ordinary and we urge the Congress and the administration to find common ground.
Failure to act on the looming year-end tax increases would yield the largest tax increases in American history coupled with draconian, ill-designed, across-the-board discretionary spending cuts. Economists from across the political spectrum warn that such tax increases and spending cuts would have a devastating effect on a still sputtering U.S. economy, quite possibly returning it to recession. Moreover, the onset of harm to the economy will not wait until yearend. The very notion that the fiscal cliff exists has increased uncertainty, which has already begun to retard consumer spending and hamper business investment.
In the immediate-term, legislation must be enacted to extend all of the 2001 and 2003 tax rates (including current marginal rates, dividend and capital gains rates, and estate tax relief), to extend vital expired and expiring business tax provisions, and to provide alternative minimum tax (AMT) relief. We urge you to act expediently to find spending cuts to replace a sequestration never intended to go into effect.
We call your attention to the fact that short term action is not a substitute for long term fundamental fiscal reform. In addition to immediate action on the fiscal cliff, we also urge you to firmly commit to tackling comprehensive tax reform and fundamental spending reforms in the next Congress.
Over the coming two years, lawmakers must enact fundamental tax reform that lowers marginal tax rates, promotes the global competitiveness of U.S. companies, reduces complexities and promotes compliance. And, legislation must provide appropriate transition rules for businesses and the economy to get from here to there.
Action cannot stop with the tax system. We urge you to develop a long term plan to address America’s excessive spending, particularly entitlement spending. Such a plan should substantially and quickly reduce the current deficit, stabilize the debt-to-GDP ratio and put it on a downward trajectory within five years, and approach a balanced budget within 10 years. Reform must foster economic and job growth because strong economic growth is a necessary condition for achieving fiscal balance.
America is accelerating toward a fiscal cliff while at the same time Congress and the President are ignoring a growing long-run fiscal imbalance. While solutions to these dual challenges may seem to be at odds with each other, they are not. The Chamber believes Congress and the President can avoid the impending cliff by temporarily extending the current tax policy and prioritizing spending cuts rather than resorting to sequestration. Simultaneously, Congress should establish a process and a firm deadline of two years to address the longer-run issues of tax and entitlement reform.
The Chamber recognizes that these issues are daunting ones, that these times are difficult for many American families and businesses, and that America is entering the crucible of what may be one of the most heated elections in recent decades. But these factors cannot – and should not – serve as excuses for inaction. The threat of further harm to the American economy is real, and the American people and business community should not be forced to wait. The Chamber believes Congress and the President should act now; the voters will act in November.
R. Bruce Josten