Sen. Kent Conrad, Published December 22 2010
First priority is to jump-start economy; then tackle deficitAs 2010 draws to a close, many families across America are reflecting on a tough year economically. While we’re enjoying boom times in North Dakota, the hard reality is that the national economy remains sluggish. A lot of Americans are hurting. Some 24 million people are out of work or “underemployed.” That’s one in six working-age Americans. More must be done to create jobs and strengthen the economy.
In an effort to accelerate economic growth, the Obama administration and Republican leaders recently agreed to a broad plan to extend expiring tax cuts as a way to create jobs and provide vital tax relief for millions of middle-class Americans.
I do not agree with all the elements of this tax cut extension package. Most notably, I oppose the estate tax provision included in the package. I favor an estate tax exemption of $3.5 million per person at a 45 percent rate instead of the $5 million per-person exemption at a rate of 35 percent in the package. But at the end of the day, I voted in favor of the overall proposal. I believe the package – as a whole – is necessary to strengthen the economic recovery.
Above all, the plan provides a two-year extension of all the tax cuts that are set to expire Dec. 31 and ensures middle-class taxpayers are not hit with a tax increase at the start of the new year.
The package also includes a payroll tax cut for working families. This will provide a one-year, 2 percentage point reduction in employees’ Social Security payroll taxes. This tax cut will increase a worker’s take-home pay. For example, a North Dakotan with $40,000 in income would save $800. This measure is widely recognized by economists across the political spectrum as an effective way to boost growth and job creation.
Here are some more examples of the tax cut benefits provided by this package: A mother with one child with $20,000 of income will receive a $1,105 tax cut. A married couple with $40,000 of income will receive a $1,943 tax cut. And a married couple with two children with $60,000 of income will receive a $3,343 tax cut.
Additionally, the package includes tax cuts for businesses in North Dakota and across the nation, allowing them to write off 100 percent of their capital purchases in 2011. The provision is a useful incentive to get businesses to start spending again and could generate more than $50 billion in additional investment in 2011. The agreement also includes a two-year extension of the research and development tax credit and other tax incentives to support business expansion.
I recognize that this package will increase the deficit over the next two years. But allowing the economy to fall back into a recession would do even greater damage to our fiscal position. So we need to distinguish between what is needed for the economy and budget in the short term versus what is needed in the long term. In the short term, we need to boost economic growth and create jobs. That’s job one. And the tax cut extension package will help do that.
Then we can pivot and deal with the deficit and debt longer term. In the coming year, we need to develop and put in place a comprehensive, long-term deficit reduction plan that restores confidence in America’s fiscal future.
I believe the deficit and debt reduction plan assembled by the President’s Fiscal Commission – on which I served as a member – has provided a way forward. The plan, titled “Moment of Truth,” cut federal deficits by nearly $4 trillion over the next decade, providing a road map to putting America back on a solid fiscal path.
So we now have a responsible and realistic bipartisan plan on the table, and national attention is focused on the serious threat posed by America’s mounting debt. We cannot let the Fiscal Commission’s plan fall idly by the wayside. It is up to Congress and the president to come together to finish the job. A summit between the White House and congressional leaders – Republican and Democrat – is the vital next step in efforts to get the nation’s financial house in order. It is absolutely essential to America’s economic future.
Conrad, D-N.D., is chairman of the Senate Budget Committee.