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As the fiscal cliff deadline looms, President Obama and the GOP grapple behind the scenes, in search of a solution to the gridlock. The President vows to restore the Bush-era tax cuts on the United States’ wealthiest citizens, while Republican House Speaker John Boehner recently submitted a counteroffer that features tax and entitlement reform. Amidst all the cloudy debate, one local economics professor says the two sides need to reach an agreement before the January 1 deadline – or else. KSMU’s Samuel Crowe reports.
If the two sides can’t come to agreement by the New Year, the United States faces a plunging stock market and a downgraded credit rating, says Dr. Steve Mullins, professor of economics at Drury University in Springfield. What the country needs, he says, is an agreement now.
“The last thing the economy needs right now is additional evidence that our political leadership can’t solve problems, and additional uncertainty about what the federal government’s tax and spending policies are going to look like in the near future,” Mullins said.
And if no agreement is met, we’ll see a tax increase across the board and mass cuts in federal spending. Mullins admits that this might get us closer to getting our budget deficits under control. But he says such a fiscal restraint, done so quickly, will push us back into a recession. And while reform in tax policies and entitlement spending are surefire long-term goals, Mullins says getting out of that recession should be the United States’ first priority.
“That’s a problem that we need to solve, and dealing with budget imbalance is something that we have more time to solve,” Mullins said.
Both sides are at fault, Mullins says, starting with the Republicans’ anti-tax ideology.
“They’ve put us in a situation where one wing, one party of our national government, up to this point, has basically said ‘We don’t care what the federal government needs money for. We might need money to fight wars in Afghanistan and Iraq. We’re not going to raise taxes.’ It’s just an unrealistic way to try and make a policy to assume from the get go that it never makes any sense to raise anybody’s tax, anywhere, anytime,” Mullins said.
But Mullins says the Democrats are to blame, too.
“They seem to talk as though we can get out of this long term fiscal imbalance without making any serious changes to entitlement programs like Medicare, Medicaid and Social Security. I just don’t think that’s possible either,” Mullins said.
So who’s benefitting from this fiscal fiasco? It’s the macroeconomics student across the country, Mullins says. Being able to demonstrate relevance to what’s being taught in the classroom makes it easier for both professor and student.
“It’s been easier to teach macroeconomics with the great recession, and more recently these budget battles, students have seen ‘Hey, there’s some stuff going on that economics can help us understand.’ That’s the good news – they’re interested,” Mullins said.
And the bad news? These are scary times, Mullins says, with an economic future in flux and both sides seemingly incapable of making a decision. For KSMU News, I’m Samuel Crowe.