Erskine Bowles and Alan Simpson, cofounders of the Campaign to Fix the Debt. (Mark Wilson/Getty Images )
WASHINGTON -- Business and deficit-reduction groups said the "fiscal cliff" deal enacted Tuesday night was a positive step because it averts huge tax hikes, but they said it falls short of what's needed to stabilize the rising U.S. debt.
Thomas J. Donohue, president of the U.S. Chamber of Commerce, said the deal "does not even begin to address the serious fiscal challenges we face."
“The new Congress and the administration must begin work immediately to slow runaway spending through structural entitlement reforms," Donohue said Wednesday. He said policymakers needed to spur economic growth by overhauling the tax code and increasing U.S. energy production.
The Business Roundtable, a group of top corporate chief executives, said President Obama and Congress have only started to deal with the nation's fiscal problems by pulling back from the "cliff" of severe, automatic tax increases and government spending cuts that were to go into effect with the new year.
"When pressed to the limit, political leaders averted some of the most immediate negative consequences of the short-term fiscal cliff, but left unaddressed the most serious and fundamental reforms required for the country’s long-term economic health," the group said. "We hope political leaders will now work continuously to agree on market-credible structural fiscal and spending reforms needed for America to compete in a modern global economy."
The deal approved by the House on Tuesday night raises tax revenue by $620 billion over the next 10 years, largely by allowing tax rates to rise on annual income of more than $450,000 for households and $400,000 for individuals.
The legislation averted an income tax increase on all Americans as the George W. Bush-era tax breaks expired. Most economists agreed that such an increase, combined with automatic spending cuts, would have pushed the country back into recession in the first half of the year.
The deal did not address spending, delaying the automatic spending cuts for two months. That did not sit well with groups that have been pushing the government to reduce the growing federal deficit.
The Campaign to Fix the Debt, a coalition that included top chief executives, said the compromise legislation that preventing most of the automatic tax increases from taking effect was "a small step forward" in efforts to reduce the deficit.
But it also was "a missed opportunity to do something big to reduce our long term fiscal problems," said the group's cofounders, Erskine Bowles and Alan Simpson, who headed President Obama's deficit reduction commission.
"Washington missed this magic moment to do something big to reduce the deficit, reform our tax code, and fix our entitlement programs," they said.
"We have all known for over a year that this fiscal cliff was coming," Bowles and Simpson said. "In fact, Washington politicians set it up to force themselves to seriously deal with our nation’s long term fiscal problems. Yet even after taking the country to the brink of economic disaster, Washington still could not forge a common-sense bipartisan consensus on a plan that stabilizes the debt."
A short-term tax deal was necessary to "protect the fragile economic recovery in the short term" said Michael A. Peterson, chief operating officer of the Peter G. Peterson Foundation, a leading deficit-reduction advocacy group. But he said more needs to be done.
"The goal of any sustainable fiscal policy must be to stabilize the debt as a share of the economy and put it on a downward path," Peterson said. "Until we have a plan that stabilizes our federal debt, uncertainty and lack of confidence will continue to be a drag on our current economy and threaten our future prosperity."