As 2012 winds down and the holiday season comes and goes, the U.S. economy continues to move toward the so-called fiscal cliff, which economists think could move the country into another recession if not remedied.
At the end of the year, tax cuts enacted by then-President George W. Bush will expire at the same time spending cuts are to be made, which could stall the economy. That’s a concern among some local leaders.
Tor Michaels, chief of staff for state Rep. Scott Conklin, D-Rush Township, said if nothing is done, Centre County and the country as a whole could see job losses and added difficulties in creating jobs.
“If we go off the fiscal cliff, it would be devastating,” Michaels said, adding that he thinks the problem will be solved in time.
Michaels said President Barack Obama and the Republican-controlled U.S. House of Representatives will have to come to a compromise with the Democrats giving on the spending issue and the Republicans giving on the tax issue.
Penn State Dickinson School of Law professor Sam Thompson said the fix is fairly easy in the short-term, economically, but this could turn out to be a bigger long-term problem.
“Virtually every economist who’s not politicized agrees that when you get into a tight spot like we’re in, you need to increase government spending and decrease taxes,” he said.
Thompson said that would bring extra money into the economy, stimulating consumer spending, but ultimately increasing the country’s growing deficit.
But the spending cuts and tax increases would hurt the economy immensely, he said. Centre County could see some tax increases and budget cuts from the federal government — a situation that Thompson said would be troublesome for residents and businesses alike.
“It’s an absolutely disastrous way to run the economy of a country like the United States,” he said.
He added that the tax increases would be the major problem that needs to be solved. Both parties will agree more or less on curtailing the spending cuts, but the issue of raising taxes for households making more than $250,000 could be a problem.
Chamber of Business and Industry of Centre County President Vern Squier said he can’t speculate on specific outcomes, but going off the fiscal cliff would have a distinct negative outcome for businesses in the county.
Squier said businesses hope for some proclamation in terms of government economic action, and “changing the equation” could stunt growth and slow investments.
“It falls in the category of being to the business community’s disadvantage to occur, to say the least,” he said.
State Sen. Jake Corman, R-Benner Township, said he doesn’t want to speculate that the federal government won’t do its job and balance the budget, but he said he is concerned about potential funding cuts to Pennsylvania if the problem is not solved.
“They need to do the responsible thing and balance the budget,” he said. “It’s the only moral and responsible thing to do.”