SITREP - November 10th, 2012

It’s over.  Finally.  And while I wish the outcome had been different (very much so), the American people have made their choice and it’s time to get back to doing the hard work of governing.  Here is a quick rundown of where things stand (particularly the “fiscal cliff”) and my take on the situation.

The election, for the most part, left the distribution of power in Washington unchanged – President Obama will remain in office, Majority Leader Harry Reid still controls the Senate, and the Republicans maintained a strong majority in the House.  With the broad inability we have seen over the last few years to reach a compromise on the major issues facing the nation, Americans are concerned that the gridlock will continue.  I understand that concern, but I, for one, am optimistic and here is why:

Both sides have made their positions clear – the things they can’t bend on and the things that they can work together to find common ground on.  There is far more common ground than the media really portrays.  At this point, for instance, the main sticking point is over whether to raise tax rates on high-income individuals and small businesses.  House Speaker John Boenher has made it clear that he believes that raising the tax rates is a non-starter but that there are ways to increase revenue by reforming the tax code.

In a nutshell, the 70,000 pages worth of tax code are full of all sorts of special interest perks and loopholes, and deductions, and preferences and so on.  Because you need to have an army of tax attorneys to take advantage of those provisions, the money saved typically accrues to higher income individuals and giant corporations – not middle class families and small businesses.  Speaker Boehner’s position is to scrap the current code, and use the savings to lower rates for everybody.  In other words, getting rid of the loopholes and deductions increases revenue, but so does having a fairer and more efficient tax code.  The more efficiently that capital can be invested in the economy, the better the prospects are for growth.  The non-partisan Congressional Budget Office has confirmed that point in their most recent report.

So the truth is, while the media loves the gridlock storyline, I think that the potential is there for the President to come together with Congress and actually get something done.  The ball is largely in his court.

I also believe that there is a consensus on averting the disastrous cuts to our Armed Forces that will happen with sequestration.  The President’s own Secretary of Defense (among others) have said publicly how devastating this cut would be for our military and our security.  Nobody wants to see that happen and I think that fact alone is encouraging.  I will know a lot more in the coming weeks about what we can expect to see out of these negotiations and I will certainly keep you up to date as things evolve. In the meantime, as always, if you have any questions or concerns, please let me know. The feedback really helps.    

Sincerely,

Rich Nugent

Member of Congress