Entries in Taxmaggedon (3)


Lawmakers, Business Experts Launch Campaign To 'Fix the Debt'

Andrew Harrer/Bloomberg via Getty Images(WASHINGTON) -- It’s “a life threatening problem,” a “crisis,” the “single greatest long-term threat to [business'] ability to compete the global marketplace” that risks, “squandering a legacy of over 200 years,” making America go “broke” and slamming “the breaks on the global economy.”

The way debt reduction experts, advocates and former lawmakers describe it, stepping off the fiscal cliff that looms at the end of this year -- when a cocktail of expiring tax cuts and automatic spending cuts will strap taxpayers with a $600 billion bill in 2013 -- is like stepping into the final scene of Armageddon. Except Bruce Willis never volunteers to blow up the asteroid.

“If we do nothing and barrel through this fiscal cliff at the end of the year, we are going to have about $7 trillion hit this country right in the gut,” said Erskine Bowles, who along with former Sen. Alan Simpson devised a debt reduction plan last year to prevent this doomsday scenario.

Congress has five and a half months to scrape together a plan that will appease the no-new-revenues Republicans and the don’t-touch-entitlements Democrats in order to prevent nearly 50 tax cuts from expiring and $1.2 trillion in automatic spending cuts from being slapped largely on the Defense Department on Jan. 1, 2013.

“That is crazy because the effect of that would be somewhere between one and two percent of GDP and that is enough to put our country back into a recession,” Bowles said at a press conference announcing a new campaign to raise awareness of the imminent taxmageddon. “That we cannot have.”

But with a polarizing presidential election planted two months before D-Day, it is about as likely that Congress will pass and the president will sign a sweeping debt reduction deal before November as it was that Bruce Willis would make it off of that Armageddon asteroid alive.

“It looks like politics is going to override common sense and nothing is probably going to happen until after the election,” Bowles said. “If the members of Congress just start getting ready and just start doing their homework then, that’s too late.”

That is why Bowles, along with a group of debt reduction experts, former lawmakers, non-profit leaders and Fortune 500 companies CEOs, Tuesday launched the Fix the Debt campaign, which aims to galvanize public support for a comprehensive debt reduction plan.

“We are trying to do some homework because the homework is not being done in the Congress today,” Bowles told ABC News after the announcement. “We are trying to bring together a bipartisan group of people so they can act when they’re ready. So when the time is ready they can go to work.”

The group hopes to collect 10 million signatures in an online petition in support of reducing the deficit by at least $4 trillion and present Congress with the best of the many debt-reduction commission’s plans, including pieces from the Bowles-Simpson plan, the authors of which founded the Fix the Debt campaign.

“Everyone knows in their hearts and in their minds what has to be done,” said former Pennsylvania Sen. Edward Rendell, co-chair of Fix the Debt. “It’s just finding the political will to get it done. We believe that’s our job, to infuse Washington with political will.”

Copyright 2012 ABC News Radio


Ben Bernanke Warns Congress on ‘Taxmageddon’

Chip Somodevilla/Getty Images(WASHINGTON) -- Federal Reserve Chairman Ben Bernanke warned Capitol Hill today that any modest gains the economy is making could all be lost if Congress doesn’t take action to avert the so-called “taxmageddon” by the end of the year.

“As is well known, U.S. fiscal policies are on an unsustainable path,” Bernanke told the Senate Banking Committee. “The most effective way that the Congress could help to support the economy right now would be to work to address the nation’s fiscal challenges in a way that takes into account both the need for long-run sustainability and the fragility of the recovery.”

Congress is facing a year-end “fiscal cliff,” the intersection of several tax provisions — notably, the expiration of Bush-era tax cuts, $1.2 trillion in automatic spending cuts because of the sequester and expiring payroll tax breaks, which, if not addressed, could cost American taxpayers $310 billion in tax increases next year.

“Recovery could be endangered by the confluence of tax increases and spending reductions that will take effect early next year if no legislative action is taken,” Bernanke said.

But as leadership from both sides of the aisle continue to wage an increasingly polarized battle over taxes, Sen. Chuck Schumer, D-N.Y., today urged the Federal Reserve on measures to take economic recovery into its own hands.

“The bottom line is very simple: We’re not going to get the fiscal relief we want, at least over the next short while,” Schumer said. “Given the political realities, Mr. Chairman, particularly in this election year, I’m afraid the Fed is the only game in town.”

Bernanke testified on Capitol Hill to deliver his semiannual report, painting a picture of slowing job growth, tepid manufacturing rates and weakened progress on the housing market in the second-quarter of 2012. The U.S. economy has continued to recover, he said, but growth indicators are moving at a pace that he called “disappointing.”

While the unemployment rate has fallen about a percentage point since late 2011, average growth in payroll employment has dwindled to 75,000 per month, down from 200,000 then. Bernanke said jobs related to the warm weather last winter might be to blame for some — but not all — of the languid jobs momentum.

The housing sector is seeing “moderate” growth, he said, with construction and home sales gradually increasing, thanks to unprecedentedly low mortgage rates. But factors like tough lending standards for would-be buyers, plus an abundance of vacant or foreclosed homes, continues to hamper growth.

Bernanke projected unemployment rates would remain at 7 percent or higher until the end of 2014, with the GDP growing at a lower-than-expected pace of 2.2 to 2.8 percent in the next year.

He indicated the Federal Reserve is willing to take action to avert a second financial crisis but would not elaborate on possible plans or a timeline for implementation.

“We will evaluate our options going forward,” he said, adding that it’s important to weigh the costs and risks associated with some non-conventional measures to spur economic growth. “If we are not getting sustainable improvements, we’ll have to seriously consider taking additional action.”

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Copyright 2012 ABC News Radio


Bernanke Warns Congress on 'Taxmaggedon'

Alex Wong/Getty Images(WASHINGTON) -- The Federal Reserve Board chairman had a stern warning Thursday for Congress: “taxmaggedon” is real, it’s coming and only lawmakers can save the nation from falling off this rapidly approaching “fiscal cliff.”

“What is particularly striking here is that this is all pre-programmed,” Fed Chairman Ben Bernanke said. “If you all go on vacation, it's still going to happen, so it's important to be thinking about that and working with your colleagues to see how you might address that concern at the appropriate time.”

Bernanke, speaking in front of the Joint Economic Committee, was referring to the so-called “taxmaggedon,” the year-end intersection of the expiration of the Bush-era tax cuts, the $1.2 trillion spending cuts due to the sequester, and expiring payroll tax breaks which, if not addressed, could cost American taxpayers $310 billion in tax increases next year.

“The so-called fiscal cliff would, if allowed to occur, pose a significant threat to the recovery,” Bernanke warned. “If no action were taken and the fiscal cliff were to kick in in its full size, I think it would be very likely that the economy would begin to contract, or possibly go even into recession and that unemployment would begin to rise.”

Bernanke said that in the short term if all the measures would occur together they would amount to a withdrawal of spending and increasing in taxation between 3-5 percent of GDP, which would have a “very significant impact” on the near-term recovery.

“What I'm saying is that, in ways that are up to Congress, steps should be taken to mitigate that overall impact. And what combination of tax reductions and spending increases -- that's really up to you,” Bernanke said, “but I urge Congress to come to agreement on that well in advance so as not to push us to the 12th hour. But again, I think that trying to put our fiscal situation on a sustainable basis is perhaps one of the most important things that Congress can be working on.”

The single biggest item in the fiscal cliff, Bernanke said, is the potential expiration of the so-called Bush tax cuts.  If everything else were held constant, he said that expirations alone would have adverse effects on spending and growth in the economy that would be significant.

“I'm not necessarily saying that the right thing to do is to extend those cuts,” he added. “It could be there are other steps you could take that would have a similar impact. But that is the single biggest component of the so-called cliff.

Rep. Sean Duffy, R-Wisc., asked if this means that the Fed chairman would advise that the tax cuts should be extended.

“I'd tell you to try to avoid a situation in which you have a massive cut in spending and increase in taxes all hitting at one moment, as opposed to trying to spread them out over time in some way that will give less -- create less short-term drag on the U.S. economy,” Bernanke responded.

Beyond Congress’ end of the year to-do list to avoid the potentially devastating effects of “taxmageddon,” Bernanke said the Federal Reserve is prepared to take steps to help the U.S. economy, but refused to be pinned down on what additional steps can be taken to spur growth and did not signal imminent action.

As always, the Federal Reserve remains prepared to take action as needed to protect the U.S. financial system and economy in the event that financial stresses escalate," Bernanke said.

Copyright 2012 ABC News Radio

ABC News Radio