The current path leads straight to the fiscal cliff — nearly $500 billion in tax increases in 2013, combined with sharp cuts in federal spending. Without changing course, CBO warns, economic conditions in 2013 “will probably be considered a recession,” with unemployment around 9 percent late in the year.
The CBO’s “alternative” scenario assumes that Congress will head off steep tax hikes and deep budget cuts. If that happens, the agency projects that unemployment and growth will remain at about the same levels as in 2012, with another $1 trillion budget deficit likely in 2013.
If that sounds like a terrible choice, it’s because it is grounded in a stubborn belief that government spending is the main driver of the nation’s economy. Cut spending, the CBO economists figure, and you necessarily stall the economy.
The dismal record of stimulus spending and quantitative easing over the last few years should by now have persuaded Capitol Hill, Wall Street and Main Street alike of the need for a different approach.
That approach would combine restrained government spending, lower tax rates, entitlement reform, and the repeal of unwelcome government mandates that increase uncertainty. Letting American businesses, workers and consumers keep, save and invest more of the money they earn is the way to economic health.
Whoever voters put at the helm of the ship of state on Nov. 6, they must insist on the plotting of a new economic course.
However, I'm afraid it' too little too late. We're in for a tough road ahead no matter who wins this election.
