Can Washington Clean Up Its Fiscal Mess?
March 19, 2013
Sequestration was a bitter pill to swallow. Can American manufacturers and industry, still awaiting its effects, stomach a long 2014 federal budget process, yet another continuing resolution, and comprehensive tax reform still ahead? No matter how you look at it, manufacturers are operating under a more uncertain and unstable business environment. Can our elected leaders in Congress come together and make the right decisions when our competitiveness and economic future are at stake?
The House and the Senate are considering vastly different versions of the 2014 budget. It’s the first time in years the Senate has even introduced a budget. As expected, both plans are partisan and dead-on-arrival as written. However, they represent the beginning of what’s to come, as our elected leaders grapple with the nation’s financial problems while doing their best not to alienate voters.
The good news is that the Congressional Budget Office (CBO) is forecasting a 2013 budget deficit of $845 billion, which is down from just over $1 trillion in 2012. The lower projection is the result of the increase in revenue from individual and payroll tax increases enacted last year, while spending basically held steady. If the CBO forecast is correct, it will be the first time in five years that the deficit falls below $1 trillion.
Regardless, most agree that significant action must be taken to get the nation’s fiscal house in order. Many voters are familiar with House Budget Committee Chairman Paul Ryan’s (R-Wis.) “Path to Prosperity” 2012 budget, which was approved by the House two years ago. It gained national attention for its aggressive approach to deficit reduction and was endorsed for the most part by Mitt Romney when he chose Ryan as his running mate in the 2012 presidential campaign.
Representative Ryan’s 2014 budget is even more aggressive: it aims to balance the deficit in 10 years by slashing $4.6 trillion in spending, consolidating tax brackets, lowering the top tax rate to 25 percent, and effectively repealing the Obama administration’s health care reforms.
In contrast, the plan introduced by Senate Budget Committee Chairwoman Patty Murray (D-Wash.) is focused on reducing the deficit to $566 billion by 2023. While it also includes significant spending cuts, the $975 billion that would be axed is not nearly as severe as the figure in the House’s plan. The Senate’s plan also provides $100 billion in stimulus spending on infrastructure projects and job training programs, and raises $975 billion in new revenue by eliminating unspecified deductions.
Congress has until April 15 to pass a budget, but that’s a deadline neither chamber is likely to heed. The Obama administration is expected to release its budget framework soon, although it was due last month. Is the gulf too great for a grand bargain to be struck? Unfortunately, conventional wisdom says that’s probably the case.
By every account, the two chambers are miles apart on tax increases, spending increases, spending cuts, and tax cuts. President Obama has even made trips to Capitol Hill recently to broker a deal, but without success. However, there are two areas where both sides agree on the need for action.
Both the House and Senate budget blueprints rescind the sequester in favor of more targeted spending cuts, albeit the two sides can’t agree on which programs should be cut. And both plans call for long-term tax reform, which is perhaps the greatest opportunity for compromise and achievement. Realizing that U.S. tax policy continues to be one of the most serious impediments to growth for American businesses, the chairs of the House and Senate tax writing committees are committed to moving comprehensive tax reform legislation through the 113th Congress.
House Ways and Means Committee Chairman Dave Camp (R-Mich.) recently released his second discussion draft, which addresses corporate and individual rates. Representative Camp’s proposal lowers rates for individuals, small businesses, and corporations; moves to a territorial system of taxation; and simplifies compliance for small businesses. It is the result of extensive discussions with stakeholders and multiple hearings in the last Congress. The Ways and Means Committee is currently seeking public comment on the draft through mid-April. Information can be found at the committee website HERE.
Senate Finance Committee Chairman Max Baucus (D-Mont.) is scheduled to release his proposal this spring. It’s expected to include revenue increases on high-earners and to eliminate special-interest tax deductions.
Negotiations on a 2014 budget are ongoing, but without a compromise they could very well result in another continuing resolution come the Oct. 1 deadlines. It seems that stalling has become the norm. In the meantime, uncertainty in the business community and among American workers abounds, hampering economic growth and global competitiveness. While action is imperative, inaction is par for the course.Amber Thomas is vice president of advocacy for AMT - The Association For Manufacturing Technology. Based in McLean, Va., AMT represents and promotes U.S.-based manufacturing technology and its members — those who design, build, sell, and service the continuously evolving technology that lies at the heart of manufacturing. For more, visit AMT’s website at www.amtonline.org.