By Maria Saporta
The prospect of the fiscal cliff could actually lead to action in Congress and Washington, D.C.
At least, that’s what U.S. Sen. Johnny Isakson (R-Georgia) believes.
Isakson was the breakfast speaker Thursday morning at the Commerce Club where he talked about the dangers and opportunities that face the nation.
“The challenges before us are huge. We have just a few more weeks before we cross the fiscal cliff,” Isakson said of the perfect storm of expiring Bush tax cuts, the end of the payroll tax holiday, the return of estate taxes as well as the mandated “sequestration” where 10 percent of the federal budget would be slashed across the board. “Everybody…has been waiting for us to make some decisions. I don’t think that the majority of Congress will fail to do the right thing — to deal with the fiscal cliff.”
Isakson, who preferred to talk of the future rather than the results of Tuesday’s election, said a new tone could take over nation’s capital.
“We’ve got the inspiration of desperation,” Isakson said. “There’s no escape hatch. The damage is terrifying. The cost of going off the cliff is far greater than the cost of dealing with it.”
Although Congress and the White House have been in a stalemate for years, Isakson said the prospect of going off the fiscal cliff finally could bring the different parties together to find areas of consensus in the areas of taxes, spending and entitlements.
“The solutions are obvious. Congress just hasn’t had the guts to stand up” and implement them,” Isakson said.
He then provided a roadmap of how some of the thorniest issues could be resolved.
First, the tax code needs to be reformed. “You put every deduction and every credit on the table.”
Then the federal government should go through a “cost-benefit analysis” to decide which ones should remain and which ones should go. In Isakson’s mind, the goal would be to take the top marginal tax rate from its current 35 percent to 28 percent. If the tax code is simplified and some deductions and tax credits are eliminated, the net result will be more revenue for the country.
Spending is another area of focus, but there’s less opportunity there.
“Congress does spend too much,” Isakson said. “But in the last 12 months, our spending was $1.18 trillion and our deficit was $1.2 trillion.”
In other words, one could cut the entire federal budget and still not be able to solve the nation’s deficit.
“The third rail is entitlements,” Isakson said, even though he said he doesn’t view Social Security and Medicare as entitlements because “Americans have been paying into the system.”
But given the fact that people are living longer and the fact that the number of retirees is out of balance with the number of workers, it will be necessary to raise the retirement age for younger generations.
“Medicare is harder, but it’s doable,” Isakson said, adding that it will require “some means testing.” But the federal government does have a responsibility to provide a safety net for those who are in need.
“When you put entitlements on the table, the tax code on the table, and when we put spending on the table, we can get there,” Isakson said. “Our debt is $16 trillion. Our net worth is $16 trillion. We’re broke. We need to amortize our debt. The good news is that we can solve the problem.”
Then Isakson gave his personal prediction of what he thought would happen over the next two months.
“I can’t believe that Congress, in the majority, won’t face the fiscal cliff,” he said. “I do believe the tax rates will be extended for another year. There may be a debate on the top rate. We can’t just keep kicking the can down the road.”
But he does think payroll taxes will go back up but that all the other rates will stay in place for another year.
About sequestration, Isakson quoted a recent comment by President Barack Obama, who said: “It ain’t going to happen.”
“We aren’t going to cut $1.2 trillion across the board,” he said, adding that some subsidies, such as the one for ethanol should be removed. “We need to do a solid cost benefit analysis” of all spending. “We have run the clock out for too long,” Isakson said. “The election is over. It’s time for us to do the tough things.”
Isakson then pledged that he will be going “back to Washington committed,” and ready to “do the tough things and the right things. I’m ready to go.”
In one of his few comments about the election, Isakson said it was important for the Republican Party to “operate under a big tent.” The “polarized primary situation” ended up nominating candidates who were not able to win the general election. “It’s one thing to win a battle and another thing to lose the war,” said Isakson, urging people at the breakfast to encourage bi-partisanship. “If you don’t demand a bi-partisan approach, you are going to get what you elect,” he said.
During the question-and-answer period, the senator was asked about his colleague, U.S. Sen. Saxby Chambliss (R-Georgia), an original member of the Gang of Six — an equal group of Republican and Democratic senators who have been trying to come up with a plan to reduce the nation’s debt. Isakson said that today, 46 senators have signed on to the effort, which has been based on the recommendations of the Simpson-Bowles deficit reduction commission. Chambliss has been criticized by some members of his party for his willingness to work across the aisle.
“I’ve never seen a time when I took a position of leadership and didn’t get criticized,” Isakson said. “Saxby Chambliss has done what’s right.”
Isakson then quoted Mark Twain: “When confronted with a difficult decision, do what’s right. You’ll surprise a few. You’ll amaze the rest.”
The one time Isakson criticized Obama during his talk was over the recommendations presented by Simpson-Bowles, a commission that was put together by the White House.
“I’ll never understand why the president didn’t bring Simpson-Bowles to the Congress,” said Isakson, adding that if he had, it would have helped his re-election. But now he has a second term to work on these tough issues.
“I’m sure he would want to leave a legacy,” Isakson said. “Simpson-Boyles is the footing upon which you can build a house that will last. We have got to get off the partisan divide.”
And then he added that the climate has changed significantly from two years ago (when the top priority of some Republicans was defeating Obama’s re-election).
“We all share the same problem,” Isakson said. “And that’s why I’m so positive and optimistic.”