Heartland Institute Experts React to Fiscal Cliff Deal

The so-called “fiscal cliff” was averted New Year’s Day when the House of Representatives voted 257 to 167 on a package that easily passed the Senate earlier. The president signed the bill package of tax hikes and modest spending reductions before returning to vacation in Hawaii January 2.

The following statements from budget and tax experts at The Heartland Institute may be used for attribution. For more comments, refer to the contact information below. To book a Heartland guest on your program, please contact Jim Lakely at [email protected] and 312/731-9364.

“The deal appears to do little or nothing to cut government spending, limit debt, or reform the tax code. The deal actually complicates a tax code that is already incomprehensible and soul-crushing. It is astonishing how much focus was put on taxes throughout the fiscal cliff talks. The problem has never been taxes. It’s been spending.

“The budget deficit this year is $1.1 trillion. I say raise taxes $1.1 trillion now, immediately, on everyone. In this way Americans would see the true costs of the government services our spendthrift lawmakers dole out. And maybe, faced with that truth, Americans will start demanding fewer government services and punishing lawmakers who keep doling them out.”

Steve Stanek
Research Fellow
The Heartland Institute
Managing Editor
Budget & Tax News
[email protected]

“The latest ‘compromise’ out of Washington does not inspire confidence that Congress and the Obama administration can deal with the fiscal challenges facing the federal government. Quite the opposite: The fundamental problem of unconstrained spending has not been addressed. Until it is we are destined to go from fiscal crisis to crisis — hardly a recipe for economic growth. Let us hope otherwise, but is a major economic catastrophe the only path out?”

Cecil Bohanon
Professor of Economics
Ball State University
[email protected]

“There are obvious omissions and difficulties with the agreement — chief among them the almost non-existence of spending cuts, particularly cuts in defense. But the alternatives to the Republicans were little or none. Spending cuts will have to be negotiated soon, so there is hope and a very probable catastrophe was avoided. After all, the Republicans lost the election.”

Bob Ekelund
Catherine and Edward Lowder Eminent Scholar Emeritus
Auburn University
[email protected]

“The president’s primary goal in the cliff negotiations was an increase in the top marginal income tax rate from 35 percent to 39.6 percent. Had the threshold remained at $250,000, this would have raised enough money to fund the federal government for about a week. Given that the final threshold was $400,000, the revenue gain will be even less significant.

“House Republicans gave lip service to spending restraint, and especially entitlement reform, but managed to play their hand so clumsily that no significant cuts in spending were included in the final deal. The net result of all of this sturm and drang is that the deficit will actually increase as a result of the final bill.

“At the end of the day, the only way to get out of the dangerous mess we are in is if we all make sacrifices. And that is what no one seems willing to do.”

Marilyn R. Flowers
Professor of Economics
Ball State University
[email protected]

“The best lesson learned from the fiscal cliff debate is that our current tax code is much too complicated. Instead of trying to ‘fine tune and fix’ things, let’s scrap the entire code and simplify our taxes. Let the discussion on a ‘flat tax’ continue in earnest, including such items as revenue neutrality, minimal deductions, the decreased role of the IRS among others. Our future economic growth will depend on getting back to such true simplicity.”

John W. Skorburg
Associate Editor, Budget & Tax News
Lecturer in Economics
University of Illinois at Chicago
[email protected]

“Silver linings are few and far between in the ‘fiscal cliff’ compromise, but the permanent fix to the Alternative Minimum Tax (AMT) does add some clarity and honesty to future discussions of the federal budget. By passing annual fixes to the AMT in the past, Congress was able to paint a far-too-rosy picture of future revenues and mask the depths of America’s budget crisis. By recognizing in budget law that there is no gusher of AMT revenue in the future to lower deficits, the ‘fiscal cliff’ compromise at least makes the federal government’s spending problem somewhat more apparent for the public.”

Sean Parnell
Impact Policy Management, LLC
[email protected]

“The deal that was settled was probably the best that could have been made given the untenable position Republicans had placed themselves in. The end solution is not to be found in outmaneuvering the Democratic Senate and the president, but rather in winning the battle of ideas. Until Americans once again believe in individual liberty and responsibility rather than seeking solutions to problems through government action we will teeter from one cliff to another.”

Gary Wolfram
William Simon Professor of Economics and Public Policy
Hillsdale College
[email protected]

The Heartland Institute is a 29-year-old national nonprofit organization headquartered in Chicago, Illinois. Its mission is to discover, develop, and promote free-market solutions to social and economic problems. For more information, visit our Web site or call 312/377-4000.