Members of North Dakota’s congressional delegation say more work needs to be done following votes in the House and Senate this week to sidestep the “fiscal cliff” and put the country on a more firm long-term fiscal footing.
The House passed a bill late Tuesday night by a vote of 257-167 to avert budget sequestration for two months Outgoing Rep. Rick Berg, R-N.D., was one of 151 Republicans to vote no.
Less than 24 hours earlier, the Senate voted 89-8 in favor of the legislation. Sen. John Hoeven, R-N.D., and retiring Democratic Sen. Kent Conrad voted in favor of the package.
The legislation makes the Bush-era tax cuts permanent for individuals making less than $400,000 and and couples making less than $450,000. The rate for those above the threshold increases from a top rate of 35 percent to 39.6 percent. The legislation also extends unemployment insurance for nearly 2 million people, maintains the estate tax exemption limit at its current level of $5.1 million and extends the federal farm law for one year.
A temporary 2 percent cut in the Social Security payroll tax expired at the end of the year. It was first enacted two years ago.
Berg said he voted against the bill primarily out of frustration with its overall size and contents.
“It didn’t really address the big problems, and that’s getting our fiscal house in order,” Berg said. “It kicks the ball down the road 60 days.”
Berg said he didn’t like the changes in capital gains taxes or the deferment of budget action.
“We need to reduce spending and balance the budget and reform taxes,” Berg said. “My biggest concern is that it increases the debt by $4 trillion.”
He was referring to a Congressional Budget Office estimate stating that the debt would increase by $4 trillion over the next decade compared to what would happen if all the tax increases and cuts through sequestration were to take effect.
Berg said making the Bush tax cuts permanent for most Americans “provides certainty” to small businesses and individual taxpayers and he’s optimistic about a larger deal coming together.
Conrad said the bill isn’t perfect but he voted for it because the alternative could be worse.
“I voted for it because without it, I believe, we’d go back into recession. I don’t think there was very much choice from an economic standpoint,” Conrad said. The CBO estimates that full implementation of the fiscal cliff cuts would contract the nation’s economy by approximately 0.5 percent.
Conrad said the template for a deficit reduction deal has been left for his colleagues.
The work of the the Gang of Six (later to become the Gang of Eight) that he was a member of crafted a debt reduction plan based largely off the Simpson-Bowles plan, Conrad said. The plan, written in 2011 but never enacted, was intended to slash $500 billion from the budget deficit and then cut spending and adjust tax rates to rein in debt further.
Conrad said more compromise will be essential whether Congress likes it or not.
“Neither side can do this on their own terms. Whatever is done with this isn’t going to be popular. I don’t think they’re going to have any choice with the debt ceiling and the sequester,” Conrad said. He hopes leaders of both parties and the White House begin meeting immediately after Inauguration Day on Jan. 20 to pursue a ”grand bargain.”
Hoeven called the fiscal cliff bill a good first step in the process of addressing the debt and federal spending.
“The key is that we preserved lower tax rates for 99 percent of Americans,” Hoeven said.
Locking in lower tax rates provides stability for businesses, leading to economic growth that can generate more revenue without tax increases, he said.
“We’ve got to do more to reduce spending. This is one step but we need to address the spending as well as entitlement reform,” Hoeven said.
While a concession was made by President Barack Obama on the $250,000 figure for tax increases pushed prior to the November election, 85 House Republicans and nearly all Senate Republicans provided bipartisan support. The result was the first income tax increase passed by Congress since 1993.
Hoeven said House Republicans hold some leverage in discussions on sequestration and the debt ceiling. Both sides have given some ground with the current deal, possibly providing some relief in the negotiations ahead, he said.
“I think we’re going to have a deal. These are really important issues that the American people see as things that need to be done,” Hoeven said.
Senator-elect Heidi Heitkamp, D-N.D., said her biggest disappointment in the legislation was the one-year farm bill extension.
“Congress kind of kicked the can down the road. I’m disappointed in how the farm bill amendments turned out,” Heitkamp said.
Heitkamp said there were aspects of the bill that benefit North Dakota, including the estate tax being indexed for inflation, and a one-year extension of tax credits for wind energy. She said the indexing for inflation helps North Dakota landowners and businesses and the wind energy tax credits should provide more stability for that industry.
The tax increase for individuals making more than $400,000 or couples making $450,000 affects “a very small percentage of North Dakotans,” Heitkamp said. The federal budget needs to be looked at during the course of negotiations to find sensible budget cuts,she said.
“I’ve never been a fan of across-the-board (cuts). That’s a lazy way to do a budget,” Heitkamp said.
Heitkamp said leaders of both parties need to sit down over the coming weeks and begin fleshing out a full deficit deal.
Representative-elect Kevin Cramer, R-N.D., said he’s glad Congress was able to come to some sort of deal.
“The hard work’s still ahead of us, and that’s the spending cuts,” Cramer said. “I think it’s going to be a very rigorous several months ahead of us.” Cramer said now that the new year has passed, it’s time for House Republicans to make a push for steeper spending cuts. He would have supported the “Plan B” proposal of House Speaker John Boehner, R-Ohio, last month, he said. The bill, which was floated but quickly pulled from consideration following a lack of votes from conservative Republicans, would have let the Bush-era tax cuts expire on those with incomes above $1 million.
“It was really our party’s last change to play offense. And I’m not a real big playing defense type of guy,” Cramer said.
Republicans now have more leverage as negotiations continue for a more complete debt deal, he said, and Republicans will need to strike a balance between negotiating for spending cuts without being unreasonable as the deadline approaches.
“They can’t raise the debt ceiling without the U.S. House of Representatives,” Cramer said.