There is a lot of contradictory information about the economic challenges our nation faces. As we move forward, it is important to understand clearly what these challenges are, how we got here and where we are going.
If Congress doesn’t act before January our nation faces the so-called “fiscal cliff”- a combination of about $110 billion in across-the-board spending cuts, along with $500 billion in tax increases. If these cuts and tax hikes happen, the nonpartisan Congressional Budget Office says we’ll be thrown back into recession.
President Obama has been clear—these automatic cuts won’t happen. I agree. I am confident that the threat of these cuts and tax increases will serve its intended purpose—forcing Congress to reach agreement to addressing our long-term fiscal challenges.
How did we get here? In 2011, we nearly defaulted on our national debt. This would have meant that our government would not have been able to pay its bills and our economy would have fallen into a recession. Increasing the debt limit had previously been done on a bipartisan basis, but in 2011 Tea Party Republicans held up this routine action to push for deep, ideologically motivated spending cuts.
For those who think that’s just tough negotiating, consider this: if we had defaulted, Medicare, Social Security, and veterans’ benefits would likely have stopped. Military contracts and transportation projects would have been terminated. Government and businesses’ interest rates would have skyrocketed and investors may have been scared to buy U.S. Treasury bonds—which are considered some of the world’s safest investments. Defaulting on our debt would have meant the likely loss of jobs and severely hurt economic growth and national security for years to come.
Wall Street, Main Street, and every street in between would have been impacted.
Ultimately, Congress passed a bipartisan bill that averted a default on our debt. This bill also set spending caps that will save $1 trillion over 10 years, and established a “Super Committee” that was tasked with creating legislation that reduced the deficit by $1.5 trillion. If the Committee failed, automatic across-the-board cuts totaling over $100 billion would take effect as of January 2013. These cuts would be split evenly between defense and non-defense programs.
This was a very difficult compromise but Congress came together to avoid an economic catastrophe. Hawaii’s entire Congressional Delegation voted for the compromise. So did military leaders like Republican Senator John McCain.
I supported this bill to protect Hawaii’s middle class and businesses from a second recession, or even depression. The law protects Social Security, Medicare, and veterans’ benefits from cuts. Passing this law also helped small businesses in Hawaii and across the country that would have been hurt by a global financial crisis and spiking interest rates. This was a difficult vote, but it was the right one.
Since the “Super Committee” was unable to identify a solution, Congress must now act in order to avoid the cuts and revenue increases. Right-wing members of Congress have pushed an irresponsible “cut only” approach.
In the coming months, I will fight for a balanced deal that ensures a strong national defense and protects the Social Security and Medicare benefits that our kupuna have worked hard to earn. We must identify savings where we can, raise revenue, and grow our economy in a balanced way. This is an approach President Obama advocates and that math and economics suggest is the responsible one.
It’s also consistent with the values I learned growing up here in Hawaii—that we’re better off when everyone works together, instead of simply leaving everyone to fend for themselves.