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The federal debt is an issue that needs to be addressed. Virtually everyone agrees on this.

But how big of an issue? And how should it be addressed? These are questions that deserve more robust debate than they’re receiving. As evidence of this fact, check out these recent articles by two of the nation’s most astute economic observers in which debt worries are put in their rightful place. Read More

As Congress continues to debate the best approach to reducing the federal debt and resolving the “fiscal slope” of looming tax increases and automatic spending scheduled for 2013, it’s critical to recognize that while everyone wants to “fix the debt,” the real questions are how to fix the debt, and who should pay to fix the debt.  Do we attempt to reduce the national debt through spending cuts alone, which would require eviscerating key public investments and core safety net programs in order to generate sufficient savings to make deficit reduction work? Or do we take a balanced approach that includes new revenues, along with smart spending cuts that spare programs vital to protecting the most vulnerable among us?

The American public has decisively answered this question during the recent election, choosing by overwhelming margins to support President Obama’s proposal to raise new revenues by asking the wealthiest Americans to pay their fair share.  According to a new survey by nationally acclaimed pollster Hart Research Associates, 61% of respondents support allowing the Bush Tax Cuts on incomes above $250,000 to expire at the end of the year, while simultaneously extending middle-class tax cuts on incomes below that threshold.   This includes 40% who strongly agree. At the same time, a strong majority of respondents (53%) rejected the proposal made by the US House of Representatives to hold the middle class tax cuts hostage to ensure passage of the tax cuts on incomes over $250,000. Only 42% supported blocking passage of the middle class tax cuts in order to secure passage of the tax cuts on incomes over $250,000 per year.

The Hart Associates survey reinforces the very similar findings of the exit polling conducted during the recent Presidential election—Americans support asking the wealthiest among us to contribute to fixing the national debt. For more details on the survey and its results, see the full polling memo here.

On Tuesday, Congress returned for its long anticipated lame duck session, and first up on its agenda is addressing the looming “fiscal slope”—the expiration of $5 trillion in tax cuts signed under Presidents Obama and Bush, coupled with the phase-in of $1.2 trillion in automatic spending cuts to federal defense and non-defense programs known as sequestration.

As Congress engages this debate, here are the Four Key Facts you need to know: 

#1.  It’s a “fiscal slope,” not a “fiscal cliff.”  Although the tax cut expirations and spending cuts are scheduled to begin taking effect in January 2013 (leading to overheated rhetoric about a “fiscal cliff”), they will only have a gradual impact on the state’s economy.  Both sequestration and the tax cut expirations phase-in over months and years and can be replaced by Congress at any time.  This is why we call it a “fiscal slope”—because it will only affect the economy gradually.

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In case you missed it last week, the wonks at the Center on Budget and Policy Priorities had the latest math on which factors are principally responsible for U.S. debt and deficits. And while it comes as little surprise that the #1 cause remains George W. Bush’s  massive tax cuts, the starkness of it all is still impressive to behold. See that graphs below. 

Helluva’ job  Bushie! Read More

In their appearance at Wake Forest last night, Erskine Bowles and former Senator Alan Simpson presented their long-standing plan for federal deficit reduction and joined their voices to the growing bipartisan chorus reiterating the importance of finding a balanced approach to long-term federal deficit reduction that includes new revenues and targeted spending cuts.

While the Simpson-Bowles plan isn’t perfect, it represents a reasonable starting point for “putting everything on the table” when it comes to federal deficit reduction, and especially the importance of including new revenues.  It opens the door to a fiscally responsible alternative to the spending-cuts only approach to budgeting embodied in sequestration—the looming $1.2 trillion in across-the-board spending cuts to federal programs like Head Start, education, R&D, and our nation’s military projected to cost North Carolina thousands of jobs.

Congress should build upon the Simpson-Bowles plan by replacing these sequestration cuts with new revenues created by allowing the Bush tax cuts on incomes over $250,000 per year to expire in January. This approach will negatively affect just 1.4% of North Carolina’s families by reducing their tax cut and will generate more than $1 trillion in new revenues by 2023—an important down-payment on reducing the Federal budget deficit.