U.S. Sen. Pat Toomey says he can support a congressional deal to avert a “fiscal cliff” by increasing revenue as long as the deal also reins in spending.
The Pennsylvania Republican told a business-oriented audience at DeSales University today that any deal must minimize harm to the economy and attack what he argues is the root of the nation’s fiscal crisis: overspending.
“The fundamental problem is spending,” Toomey said to about 200 attendees at an event organized by chamber of commerce and economic development groups. “There was a time the president acknowledged that. He needs to acknowledge this now.”
Toomey, a first-term Senator from Upper Milford Township, said he opposes raising income tax rates to Clinton-era levels including a top marginal rate of 39.6 percent plus higher investment taxes, as are scheduled if the Bush tax cuts expire. The top rate is now 35 percent.
Toomey said he prefers revenue hikes come from reforming tax laws though he did not specify what changes he would support.
President Barack Obama has said the public backs his position that higher taxes from top earners be part of any deficit reduction plan.
“This was a central question during the election,” Obama said in a Nov. 9 press conference. “The majority of Americans agree with my approach.”
Many analysts say the economic recovery is too weak to withstand a double-shot of tax hikes and spending cuts – the so-called “fiscal cliff” – estimated at a combined $560 billion set to take effect beginning Jan. 1.
Congress can alter that legislation, which was approved by a bipartisan debt committee that Toomey served on in 2011. The cliff also includes defense cuts, expiration of temporary payroll tax cuts, and other changes.
Toomey told gatherers that the “fiscal cliff” is a small problem compared to the country’s long-term challenges. He called for curbing the growth of entitlements and other spending before another financial crisis happens.
“I don’t want to see this can kicked down the road because we’re running out of road,” Toomey said.
If federal spending continues at the current pace, Toomey said Social Security, Medicare and Medicaid, plus interest on the debt will consume 90 percent of tax revenue a decade from now.
Toomey said that projection assumes interest rates remain historically low. Defense and non-defense spending make up the rest of the federal government’s $3.8 trillion budget.
“This is clearly not sustainable,” Toomey said. “We can’t have these three things consume all revenue and leave nothing else. It won’t happen.”
A business owner said he wouldn’t mind paying more in tariffs if it helps the country “clean up this mess.”
Albert Albright, president of Creative Tile Imports, said his Allentown business could withstand an uptick of a few percentage points in international duties, which range about 5 to 10 percent for most of his products.
Toomey balked at that approach, saying higher tariffs will restrict commerce and could ignite a trade war.
A local economic development official said wrangling in Washington, D.C., is hindering business commitments.
Pete Reinke, vice president of regional development at Lehigh Valley Economic Development Corp., said two undisclosed companies have postponed decisions to locate in the area because of uncertainty over the country’s fiscal future. Reinke said after the event the companies include a manufacturer and a distribution center.
The gathering was organized by the Greater Lehigh Valley Chamber of Commerce, LVEDC and Lehigh Valley Consortium of Professional Organizations.