A View From The Wood

Triple Jeopardy: Our Nation’s Fiscal Imbalance

Telos CEO John Wood
When I wrote an open letter to Congress in late November urging immediate action to rectify our country’s fiscal imbalance and exploding debt, I didn’t realistically expect that they would address all of the issues we faced before the end of 2012.  But I sure thought they would do more to put us on the right path than what actually happened.
Yes, Congress acted to ensure some expiring tax rates didn’t go up on almost every American, and to delay – albeit for only two months – the mindless, across-the-board sequestration cuts that would have occurred on January 2nd.  And yes, the two percent temporary payroll tax cut, put in place a few years ago as a stimulus measure, was allowed to expire – meaning as a business owner, most of my employees are paying more taxes than last year.
But were there any other real sacrifices made?  No.  Entitlement reform didn’t happen.  Tax reform didn’t happen.  Discretionary spending cuts weren’t made. 
And most of all, sequestration – the modern-day American Sword of Damocles – still hangs over our heads.  Only delayed two months, there is no actionable plan in sight to avoid it on March 1st.  Federal agencies and those of us who provide goods and services to those agencies are increasingly hamstrung in our ability to plan long-term – or even short-term – and the resultant stifling of economic activity on a macro scale is occurring, slowing our nation’s economy months before sequestration would even take effect.  
In a January 10th news conference, Defense Secretary Leon Panetta said that the DoD had been avoiding taking steps to prepare for sequestration because he thought the whole concept of automatic cuts without regard to merit, “was so nuts, that there wasn't a chance that it would happen.”  A veteran of over four decades in Washington, Secretary Panetta has been through many budget wars where, in the end, the participants found common ground, compromised and took action to do what was needed.  But now he realizes that he sorely overestimated the ability of modern Congress and the Administration to make the hard choices needed to avoid sequestration.
Unlike the ‘fiscal cliff’ we faced in December, between mid-February and the end of March we are staring at the confluence of not just two precipitating events (sequestration and increasing taxes), but three.  Think I’m kidding?
  1. We will default if the debt ceiling isn’t raised (1/24/2013 Update: Although Congress is working  to “suspend” the debt limit through May 18th, the issue of raising the debt ceiling will surely be addressed again very soon – they’re simply postponing without solving the underlying problem);
  2. Sequestration will take effect if more thoughtful spending reductions aren’t made to prevent the across-the-board budget cuts; and
  3. The federal government will shut down if Congress can’t pass appropriations bills for fiscal year 2013 (which by then, will already be half over). 
That’s a triple jeopardy scenario for throwing us back into a recession – or worse. 
Individual Members of the House and Senate keep rationalizing why they can’t support this or that proposal, but the quest for a ‘perfect proposal’ has become the enemy, and will prolong this devastating stalemate.  Congress needs to stop rationalizing things to death and check their egos and ideology at the door.  They must compromise where need be to fund the government on time, get the best deficit reduction deal possible, and not let our nation default on its obligations.  The long-term economic consequences of further stalemate are dire.
Published in the Op-Ed section of Leesburg Today on Friday, January 18th, 2013. 
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