As Congress headed off for its August recess, quite a few tasks were left unresolved, with the biggest by far being legislation to avert the looming fiscal cliff.
Most political watchers, including David Kelly, chief global strategist for J.P. Morgan Funds, believe Congress will come to some type of agreement regarding avoiding the fiscal cliff after the November election. As Kelly noted Monday in his Notes on the Week Ahead, without new legislation by the end of the year, “the Bush tax cuts, the temporary payroll tax cut and extended unemployment benefits will all expire just as higher Medicare taxes and both rounds of severe cuts to discretionary spending agreed to last August take effect.”
The website by the Chamber of Commerce, a pro-business lobby, offering market, legislative and regulatory news, called FreeEnterprise.com, recently released its list of the top five pieces of “unfinished business” that Congress left undone before its Aug. 3 departure—which includes, of course, a remedy to the fiscal cliff crisis.
Read on for FreeEnterprise’s list of Congress’ top 5 “biggest failures”:
1) Avoiding the Fiscal Cliff
Without congressional action, Americans will experience one of the largest tax increases in history and massive spending cuts beginning Jan. 1.
The Chamber of Commerce said that according to a study released by the Aerospace Industries Association, $1.2 trillion in automatic defense and non-defense discretionary spending cuts, known as sequestration, will reduce the nation’s GDP by $215 billion, decrease personal earnings of the workforce by $109.4 billion, and cost the U.S. economy 2.14 million jobs in just the first year of implementation.
Combined, sequestration and the expiration of the 2001 and 2003 tax cuts on income and investment will reduce GDP by 4%, according to economist and former Congressional Budget Office Director Douglas Holtz Eakin. A growing number of economists and experts say that driving off the fiscal cliff would result in a recession in 2013.
The House passed legislation to extend current individual rates for all taxpayers; the Senate in a party-line vote passed a bill to extend rates only for individuals earning less than $200,000 and couples earning less than $250,000. Though a bipartisan agreement on AMT relief was reached by a Senate panel on Aug. 2, neither chamber took up tax extenders—provisions such as AMT relief, R&D credit, and the active financing exception that either expired at the end of 2011 or are expected to expire at the end of 2012. Also, neither chamber addressed the imminent $1.2 trillion in spending cuts.
2) Trade With Russia, PNTR
As a condition for joining the World Trade Organization (WTO) on Aug. 22, Russia was required to implement a far-reaching package of legal and regulatory changes that will further open its market to imports, safeguard intellectual property, and ensure greater respect for the rule of law.