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  • Morning Bell: The Fiscal Cliff and Beyond

    In Washington, there is one issue on everyone’s minds: the “fiscal cliff.”

    With time running out before a massive tax hike strikes on January 1, and wide-ranging budget cuts scheduled to hit at the same time, the economy is bracing for another storm.

    Today, five public policy organizations including The Heritage Foundation are presenting their plans to first slam on the brakes before driving off the cliff, and then to reverse course and tackle our massive spending challenges as the federal government moves ever closer to the debt limit.

    In 2011, the Peter G. Peterson Foundation launched the Solutions Initiative, giving grants to six organizations spanning the ideological spectrum so that they could develop plans for long-term American sustainability. With the fiscal cliff looming, Peterson’s Fiscal Solutions Initiative II called for updates to address “2012 Post-Election: The Fiscal Cliff and Beyond.”

    The participants for this second project are The Heritage Foundation, the conservative American Action Forum, the Bipartisan Policy Center, and the liberal Center for American Progress and Economic Policy Institute.

    In an event that the Peterson Foundation is webcasting now, the organizations are discussing their ideas.

    To meet this challenge, Heritage Foundation experts updated our Saving the American Dream plan to address the fiscal cliff and then rein in spending. Our plan features a sweeping pro-growth tax reform plan to grow the economy and generate more revenues and a broad restructuring of entitlement programs to provide real economic security to seniors while making the programs affordable.

    The plan balances the federal budget within 10 years—without raising taxes—and stabilizes and then reduces the debt. The Heritage plan focuses government assistance to those who truly need it, with a guarantee that no American would have to live in poverty. It would also begin to reduce government back to its constitutionally authorized powers and make defense funding a core priority.

    Of the five plans, Heritage’s would reduce government spending the most and would reduce U.S. debt held by the public the most—by a substantial margin.

    Right now, this measure of the debt stands at 73 percent of gross domestic product (GDP)—in other words, 73 percent of the American economy. Heritage would reduce the debt held by the public to 28 percent of GDP by 2037, while the next-lowest plan by the American Action Forum comes in at 40.1 percent of GDP. (continues below chart)

    Though the Peterson project includes organizations across the ideological spectrum, there are some areas of agreement. For example, “all groups agree that the current level of agricultural subsidies provided by the federal government should be reduced.” Every group would lower spending dramatically from its current trajectory, though they take different routes to achieving this. Three of the five groups would extend the expiring 2001 and 2003 Bush tax policies and then undertake fundamental tax reform. The Peterson Foundation concludes that Congress and the President, though divided, could take a lesson from these organizations coming together:

    Although the solutions vary widely, it is clear that the United States does not have to endure a damaging drop off the edge of the fiscal cliff, nor do we have to be complacent in the face of an unsustainable long-term trajectory.

    You can watch the live webcast of “Post-Election: The Fiscal Cliff and Beyond” today. The event is already underway.

    Read the Peterson Foundation’s full report on the five policy organizations’ plans.

    Quick Hits:

    • Showing the new face of warfare, the Israel Defense Forces and Hamas have been trading attacks on Twitter while real-life attacks continue on the ground.
    • “Obama told students in 2004 he supported decriminalizing marijuana, a position that takes on new significance now that two states have legalized recreational use of the drug,” reports the Washington Guardian.
    • Popular talk show host Mark Levin visited Heritage this week to talk about what the election means for constitutional government. You can watch Heritage’s Ed Meese interview him – check out the video here.
    • Heritage’s James Carafano testified before the House Foreign Affairs Committee yesterday on questions raised by the terrorist attack in Benghazi. See what he said here.
    • Remember the original Obamacare debate over the “public option”—government insurance? As Heritage’s Alyene Senger reminds us, “Through its multi-year implementation, the law steadily evolves into a national single-payer health care system.”
    Posted in Economics [slideshow_deploy]

    13 Responses to Morning Bell: The Fiscal Cliff and Beyond

    1. glynnda says:

      Heritage, I'm wondering if any of your ideas are being taken to the talks with the President today. If possible could you comment on this after the fact? Thanks much!

    2. Morbshock says:

      The Heritage Foundation has been doing a fantastic job throughout its lifetime but we are faced with a very corrupt government where the Democrat party has been hijacked by the Socialists and Communists.
      They are a very strong force which has been eating away at our Founders core beliefs life a cancer and plan to destroy what's left of the US Constitution and our once great country.
      You need to see the entire picture in order to understand why "We the People" are faced with so much government failure since the time of president W. Wilson to the present Communist president and administration.
      No conspiracy here, just the facts.
      May GOD bless the Heritage Foundation, "We the People" and the United States of America!

    3. Patricia D'Andrea says:

      What you do not seem to understand is that President Obama has no intention of being fiscally responsible. His friend, Richard Trumpka, said the fiscal cliff is not real. Obama's goal is to bankrupt this country to help his union friends and groups like MoveOn.org. We conservatives know how to fix this finacial mess. Obama does not care.

    4. actresponsibly says:

      Elections have consequences. Let the income taxes increase, let Obamacare be felt, do not raise the debt ceiling. Let the administration's policies be enjoyed by the voters.

    5. Charles Yahn says:

      Nothing can be expected until Obama is forced to operate within a budget. Thus far he has not, and his irresponsible spending continues to build a mountain of debt. His promises to control anything in the government have been worthless.

    6. John says:

      This fits right in with Obama's mode of operation. Let the problem go until it becomes a crisis that requires immediate drastic action rather than a thoughtfully planned solution.

    7. Donald Coe says:

      Most all the conservative groups have good ideas for a solution to the "fiscal cliff." However, getting Congress to listen to ideas other than their own is a formidable task in itself. I think the Republicans should submit their plan and stand their ground.If Dens and the President don't like it, let it happen and be known that they led America over the cliff. Then Americans will learn early in this term precisely what their choices are all about and how ignorant the President actually in their needs an d how the eco nomy really works. The Republicans may then get all of America on their side.

    8. MJF in CT says:

      I am not arguing the fact that the Heritage Foundation is correct in what it is saying and that if the government were to implement the above measures, we could stave off the impending fiscal disaster. My problem is the Obama Administration will not go with it! Mr. Obama has stated time and time again that he is going to tax and double down on those who control the companies and the jobs in this Country. This alone will cut into the job market and cause more problems. Add to this the looming jaws of ObamaCare and companies will not be able to hold out. Already, there are companies threatening to lower pay and/or hours to their employees. Also, the companies are going to pass on the expenses to the consumer. So the consumer will pay for his Obamacare AND the Obamacare of everyone else over and over. With all of this happening, nothing the Heritage Foundation does will keep the United States out of the Pit of Hades and Mr. Obama will not do anything except what suits HIM.

    9. toledofan says:

      Great ideas, but, I fear all will fall on deaf ears. I suspect the Republicans will cave, taxes will increase and spending will continue. The one thing that we know is that the same people who got us into this mess are the same people who now are charged to fix it andf there is no doubt we know what Boehner and McConnell will do. Revenue is on the board and they will go for some value added tax, throw in some smoke and mirrors and viola Obama will get his way. We are in dire need of some leaders and until someone steps up to the plate, it's going to be just more of the same.

    10. khm says:

      I am glad to see that such diverse groups are cooperating on such a critical issue. The question is will this regime listen? Or is their actual agenda to let America go over the fiscal cliff?

    11. Carol,AZ says:

      We've already fallen off the fiscal cliff ._ MR transparency will describe it as_ consumer confidence reduction. Since the election_ thousands more jobs have been slashed, but who's reporting that.
      MR AWOL, at his first News Conf. in eight months_ failed to mention his plan. The stock market has tanked steadily since the election. Announced today, "Hostess" just pink slipped 18,500 employees. An American icon, in Buss_ for 82 years. So Congress will squeeze in , between Thanksgiving and Christmas a fiscal reform session.. They will put on some big boy pants to adopt conservative values and cut-up the Federal Access Card with a machete from Mr Forward who's_ addiction to spending resembles a crack addict on pay-day.
      Poverty in America will continue to rise. The clueless that believe_" the Govt will take care of them", don't even see it coming.

    12. Mike Williams says:

      Obama insists on revenue increases and the Republican leadership seems willing to discuss. Here is a proposal: A War Tax Surcharge. For two years have taxpayers pay a 3% tax surcharge on their tax bill. Bush got us into two wars and charged them to the national credit card. Have the surcharge used to pay down the war debt. This reduces the debt and the interest charges, saving more money. The United States has a tradition of wartime fiscal sacrifice stretching back to the nation's founding, yet President Bush coupled sacrifice on the battlefield with self-indulgence at home. Now it is time for all Americans to step up and help pay for those wars. However, in return the Republican leadership should demand that the current tax code be abolished and replaced by a flat tax (I like 12%) with no deductions and a national sales tax. That provides fairness, equity, and everyone pays their "fair share." Stop using the tax code for economic and social engineering and use it simply to raise revenue to operate the government.

    13. TEL says:

      I have been a member of the Heritage Foundation for many years and agree with most of your policies. However your tax plan while better than the totally broken system now in place is not the best for our country. Your plan still taxes income. The far better solution is the Fair Tax plan (HR 25/S 13) which taxes spending, a much broader tax base. This plan would make our economy soar. Please really check into it and get behind the Fair Tax!

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