Sen. Johnny Isakson tells Newsmax that Congress will come to an agreement that averts the “fiscal cliff” of tax increases and spending cuts that looms next year.
The Georgia Republican also warns that the fiscal cliff poses a bigger threat to the economy than the financial collapse of 2008.
And he maintains that an “almost dysfunctional” Congress is irresponsible for not passing a budget in three years — laying the blame on Senate Majority Leader Harry Reid.
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Isakson won a special election in 1999 to fill the House seat vacated by retiring Speaker Newt Gingrich. He was first elected to the U.S. Senate in 2004 and easily re-elected in 2010.
In an exclusive interview with Newsmax TV, Sen. Isakson discusses the likelihood of Congress and the White House reaching a deal that avoids the fiscal cliff.
“I don’t know exactly what the deal will look like. My suspicion is that we’ll come to an agreement on a down payment in terms of cuts and spending and the deficit,” he says.
“We are going to come down with some targets to achieve next year. We’ll put some enforcement mechanisms on the Congress to do its job next year, but we won’t go off the cliff.
“The big debate will obviously be whether you raise taxes on the rich or whether you reform the tax code and bring in more revenue. I favor reforming the tax code. I think (House Speaker) John Boehner already put that on the table. That raises more revenues, but without punishing one class of taxpayer, spreading the contribution across the spectrum. I think that’s what’ll end up being.”
An agreement, even if it is a temporary deal, will “give the markets the confidence that we’ll actually mean business,” he adds.
“The last time we did one of these deals was in August of last year where we left a super-committee the job of cutting or sequestration would take place. Now sequestration looms over us and nobody wants it to happen. I think you will see an enforcement mechanism to make sure Congress does its job – cuts the spending it needs to, reforms the tax code and takes a look at entitlements really for the first time since 1983.”
As to why Congress appears ready to reach an agreement only now that the deadline is approaching, Sen. Isakson says: “Congress is almost dysfunctional in some ways, particularly the last three years, where we have operated without a budget because Harry Reid won’t let a budget come forward.
“We haven’t done any appropriation bills in the last three years. We’ve been on a continuing resolution, which means you keep doing the same old thing, the same old way. That’s irresponsible, and we are finally facing the music and I think Congress will face it the right way.”
Among Republicans’ proposals for entitlement reform is a call to implement means testing on Medicare. Asked if that would impact wealthier Americans the same way a tax increase on high earners would, Isakson responds: “I think you have to have a comprehensive solution in the end. You have to deal with the tax code, you have to deal with spending, and you have to deal with entitlements. They all work together and they are all interrelated.
“I don’t think you are going to solve the problem just by reforming the tax code, or just by reforming entitlement, or just by cutting spending. It’s going to take a combination of all three.”
The CEO of Goldman Sachs recently said President Obama and Congress are “playing with fire” by not resolving budget issues, and other CEOs are expressing similar concerns.
“It’s deja vu all over again,” Isakson comments.
“All you have to do is look back to September of 2008 when Congress blinked in terms of solving the collapse of the sub-prime market and the markets dropped 1,600 points in two days until we passed TARP. It stabilized the financial markets.
“This is a worse situation than that was – the fiscal cliff we are facing. I think the CEOs are exactly right.”
But U.S. banks are better prepared now than in 2008 to deal with a downturn if the lack of a deal on the fiscal cliff leads to a recession, Isakson maintains.
“They were in dire straits in 2008, but they are basically constrained with their hands tied by Dodd-Frank, and the goal of reducing Too Big to Fail has actually reversed — we have our bigger banks getting bigger, more and more of our smaller banks are being closed.
“What Dodd-Frank intended to do it really hasn’t done except to constrict lending and shrink the available capital and free enterprise.”
Isakson is a member of the Senate Committee on Veterans’ Affairs. Asked if the nation can afford to fund veterans’ jobs programs and other benefits promised to veterans, he tells Newsmax: “First of all, failure is not an option. You have to meet the promises that you have to these veterans who have sacrificed, their families have sacrificed.
“They need their healthcare, they need their benefits. We have to make sure it happens.
“The answer is a returning economy — a growing economy is a rising tide that lifts all boats. It not only lifts revenue to the government, but lifts opportunity to returning veterans for employment, for jobs and for opportunity. The whole solution to our program is to re-invigorate and empower the economy and the free enterprise system and if we do that, all things are possible.”
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