If Congress fails to act and the economy, indeed, goes over a fiscal cliff of higher taxes and steep budget cuts Nebraska will feel the pain, at least according to United States Sen. Mike Johanns.
Johanns emphasizes that the fiscal cliff is real. The term was coined by economists who predict that the economy will fall off a fiscal cliff if Congress fails to act and Bush-era tax cuts expire and $1 trillion in budget cuts go into effect. Those economists argue the economy simply cannot absorb the shock and would most likely lurch back into recession.
Johanns says that even though Nebraska has a strong state economy, it won’t escape the consequences.
“If in fact recession occurs, we will feel that, because we, as a state, supply products around the country,” Johanns says. “So, if there is less demand for those products because people have lost their job you’re going to feel the effect of that.”
Johanns, a Republican, says some mistakenly believe the Bush-era tax cuts only affect the rich. He insists that isn’t so. Johanns points out those tax cuts include the $1,000 child care tax credit. Johanns worries the estate tax will revert to its 55% rate with a million dollar exemption. He says it wouldn’t take that large a farm operation in Nebraska to exceed that threshold.
Johanns emphasizes a two-track method of dealing with the problem. He believes the lame duck Congress should handle the most pressing need: avoiding the fiscal cliff. That would free the next Congress to work through the regular process to offer the tax and entitlement reform many claim is necessary to solve the country’s fiscal woes.
AUDIO: Brent Martin reports [:45]