The Fiscal Cliff: Recession Looms Without Compromise, Leaders in Arkansas Fear

by George Waldon  on Monday, Sep. 17, 2012 12:00 am  

Congress will face a steep fiscal cliff when it returns to Washington D.C. (Photo by Wayne DePriest)

If Congress fails to address the so-called fiscal cliff, the United States faces another recession, leaving Arkansas political and business leaders to hope the critical hour of decision will force the appearance of bipartisanship.

The fiscal cliff remains an icon of the hour: a metaphorical escarpment built on a mountain of national debt that stands at $16 trillion and growing.

Threatening to send the economy tumbling over the edge in 2013 is a convergence of possible tax increases and automatic spending cuts intended to reduce the federal government's budget deficit.

"All of that coming together would have a very, very negative effect on our economy," said U.S. Sen. John Boozman, R-Ark. "If we don't figure out how to come up with $1.2 trillion from the last deal that was struck with the debt ceiling, then we've got to have massive defense cuts."

(Video: Click here to watch Boozman talk about how the military and farms would be affected if automatic spending cuts went into effect.)

The sequestration component of the 2011 Budget Control Act mandates $1.2 trillion in budget reductions during 10 years. Those largely across-the-board spending cuts - including cuts in the defense budget that don't sit well with Republicans like Boozman - would begin in 2013.

The tax increases looming in the fiscal cliff equation are linked with the expiration of a two-year extension of tax cuts dating back to the Bush administration.

Revenue needs to increase, and spending needs to decrease, but what cost can the struggling economy bear?

"There has to be a balanced approach to whatever happens," said Ark Monroe III, an Arkansas lobbyist who represents a varied list of clients dominated by insurance companies. "There will have to be legislation to promote revenue enhancement to get more money in the door and some degree of entitlement reform to cut spending.

"Then, this gets down to where you get some control of defense spending. But as long as we're in a war, you can't make drastic cuts while you have a lot of troops in the line of duty."

Monroe recalls a slogan made famous by the late U.S. Sen. Russell B. Long, D-La., that is still appropriate today: "Don't tax you. Don't tax me. Tax the fellow behind the tree."

"These are hard choices, and everyone has to be willing to sacrifice to get there," Monroe said. "Everyone is so entrenched, and that worries me because we're on the edge of this fiscal cliff."

 

 

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