Tags: Ross | fiscal | cliff | spending

Wilbur Ross: Fiscal Cliff Talks Dwell Too Little on Spending

Thursday, 15 Nov 2012 01:33 PM

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While lawmakers and the White House are busy discussing ways to steer the country away from the fast-approaching fiscal cliff, they are placing too much emphasis on tax rates and not enough on government spending, said Wilbur Ross, chairman and CEO of WL Ross & Co.

At the end of this year, a series of tax cuts are set to expire at the same time cuts to government spending kick in, a one-two punch known as a fiscal cliff that could send the country falling into a recession next year if left unchecked by Congress.

Democrats favor allowing tax breaks to expire on wealthier Americans, while separately, the president’s Affordable Care Act will raises taxes on investment income.

Editor's Note: You Deserve to Know What Obama and Bernanke Are Hiding From Americans

While taxes merit attention, so does government spending.

“I think what’s being obscured is that it isn’t that America is undertaxed. It’s that we’re overspending and right now the whole focus is on the revenue side,” Ross told CNBC.

“You can’t solve the bulk of the problem with revenues. It’s not going to happen.”

Spending needs addressing as well, as in reality, cuts to government spending really refer to cuts in the amount of how much spending will grow.

“I think that they are articulating it wrong. Nobody is really talking about spending cuts. They are talking about slowing the rate of spending increases. Nobody has spending cuts on the table, it’s the rate of increase,” Ross said.

Healthcare, meanwhile, needs sweeping reform as well.

“You have to deal with medical, for example, talking about the reform in healthcare is a joke if you don’t deal with medical malpractice. There has been no talk about that at all on either side of the aisle,” Ross said.

“That’s a joke. That leads to overtesting, that leads to expensive insurance policies. Malpractice is not inherent in providing universal healthcare.”

One investment titan, meanwhile, says that whatever happens, the U.S. economy can survive the fiscal cliff — and can survive tax hikes as well.

“We’re not going to permanently cripple ourselves,” said Berkshire Hathaway CEO Warren Buffett, according to CNN.

“We have a very resilient economy. The fact that [lawmakers] can’t get along for the month of January is not going to torpedo the economy.”

Taxes due to rise next year include those on investment income, notably on dividend payments and on capital gains.

Taxes have risen on investment income in the past and can do so again.

“I lived through the 1950s and 60s with rates far higher for capital gains taxes and corporate taxes, and our economy boomed,” Buffett said.

Editor's Note: You Deserve to Know What Obama and Bernanke Are Hiding From Americans

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