Traverse City Record-Eagle

Archive: Thursday

November 22, 2012

A survival guide to the 'fiscal cliff'

Now that the election is finally over, the national news these days is totally dominated by the specter of the coming "fiscal cliff."

So here is a Michigan citizens' survival guide to navigating the cliff, understanding it, and hopefully surviving.

n What the Fiscal Cliff Means to Michigan: Perhaps the biggest event of the decade will start to unfold at the end of this year, when the nation hits the so-called "fiscal cliff." The ticking time bomb started last year, with the Budget Control Act of 2011, and was designed to set in place a balance of terror facing both political parties. Unless something changes beforehand, the cliff, which we reach at midnight Dec. 31, combines draconian spending cuts for both domestic and military programs with the end of the tax cuts enacted during the Bush administration.

According to a Bridge Magazine interview with Mitch Bean, the highly respected and long-time head of the House Fiscal Agency, cuts to defense and non-defense spending in Michigan alone would total $807.1 million in 2013. Repeal of the Bush tax cuts and increased payroll tax rates would reduce total state disposable income by as much as $14 billion and cut state consumption tax collections as well.

Bean concludes "the state would probably lose all the net jobs we've created in the last year to 18 months — and state revenues could easily take a $300 million to $400 million hit in 2013, necessitating budget changes." Going over the fiscal cliff would a big, big time hit to our state, still struggling to emerge from the Great Recession.

n Can Ordinary Citizens Do Anything? From our perspective out here in Michigan, it's easy to think that ordinary citizens won't be able to affect one whit all the tugging and hauling that will go on in Washington. But that's not so.

The Campaign to Fix the Debt — a national nonpartisan coalition of business leaders, elected officials, community leaders, academics and individual citizens — last week announced a Michigan state chapter. The idea is to bring together concerned citizens of all stripes to call on lawmakers to address the ballooning national debt.

Co-Chairs are Ken Sikkema, former Michigan Senate Majority Leader and current senior Policy Follow at Public Sector Consultants, and Sandy K. Baruah, President and CEO of the Detroit Regional Chamber of Commerce.

"We're at a point where citizen pressure and involvement can actually make a difference," Sikkema told me. "It's not a matter of folks in Washington not knowing what to do. It's that they're reluctant to take the hard decisions because they're afraid of the political consequences of making them. We need to encourage them to step away from knee-jerk partisanship and face difficult facts, and we need to support them when they've done so."

The Campaign to Fix the Debt is designed to focus citizen pressure on elected leaders to put our economy on a sustainable course by reforming the tax code and increasing revenues, while at the same time making smart spending cuts to programs that aren't working or aren't necessary. More than 300,000 Americans have already signed a Citizen's Petition calling on our leaders to do the right thing. For more information, and to sign up, go to: www.fixthedebt.org.

n How to Navigate the Fiscal Cliff: It won't be easy, as the problem of what to do about our nation's out-of-control spending, grotesque tax code and spiraling debt has been around for years. A recently published book — The Price of Politics, by Bob Woodward, a co-author of All The President's Men — describes in depressing detail how President Barack Obama and Speaker of the House John Boehner spent months last year trying to agree to a "grand bargain." I recommend it to anybody interested in our financial future, although you should be warned that neither the President nor the Speaker come across as particularly effective.

What the book makes clear, however, is how very complicated these matters are and how complicated it will be to get to agreement, with all the snapping and snarling from both political partisans and the special interests who infest Washington.

It's very likely that fixing our national debt will be a two-step process, with a down payment to avoid falling off the cliff due by year end and much more detailed and consequential work to be done next year. This won't be easy, as it will require designing once again a structure (complete with awful penalties) to force reluctant politicians to actually keep their eye on the ball for months at a time and come up with a long term solution to our financial problems.

One of the big opportunities for the Fix The Debt campaign will be to let people know just where negotiations are going and when to weigh in. Two Michigan members of Congress — Dave Camp, the Republican chair of the House Ways and Means Committee, and Democrat Sander Levin, the ranking minority member — are in key positions on a key committee. And I wouldn't rule out an important role being played by Congressman John Dingell, the longest-serving member of the House, who has enormous influence in the Capitol.

All in all, the decisions we face as a nation over the next 18 month are crucial to our sustained prosperity.

To fail is to concede that our democratic system simply doesn't work the way it should. I urge every concerned person to sign the Citizen's Petition — and make your voice heard.

Phil Power is a former newspaper publisher and University of Michigan Regent. He is founder and president of The Center for Michigan, a centrist think-and-do tank. The opinions expressed here are his own. By email at: ppower@thecenterformichigan. net.

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