Capitol Hill

The growing federal debt quickly is becoming one of the dominant issues in U.S. politics. A Gallup poll conducted in June indicates 79 percent of the U.S. public views the growing debt as a serious threat to the nation's "future well-being."

This has significant short-term implications heading into November's midterm elections as it may prevent the Democratic majority in Congress from pushing through more spending and tax cuts aimed at decreasing the nearly 10 percent unemployment rate. It also has long-term ramifications for federal tax and spending policies that likely will have serious effects on small businesses.

Short-term implications

Public pressure already was building for lawmakers to address the growing federal deficit when a report released in June by the Department of the Treasury indicated the budget situation is getting worse.

The report projects the annual deficit for fiscal year 2010 will increase by $600 billion more than previously estimated. That will bring the total public debt to $13.62 trillion, or 93.1 percent of the gross domestic product (GDP).

The report further projects total public debt will top $14.75 trillion, which equals 96.4 percent of the GDP, by the end of fiscal year 2011. These figures represent an alarming increase from the $5.8 trillion in public debt in 2008, which was about 41 percent of the GDP.

It's clear members of Congress are experiencing increased pressure to forego spending initiatives and tax cuts that would add to the deficit. In the weeks following the release of the Treasury Department's report, a bill containing an extension of benefits for unemployed workers, aid to state governments and extensions of expired tax credits failed to pass the Senate on three separate votes because it would have added $35 billion to the deficit.

Effects on roofing

This situation has direct implications for the roofing industry. NRCA has been working for several years to pass the Green Roofing Energy Efficiency Tax Act (GREETA), which seeks to increase demand for energy-efficient commercial roofing by reducing the problematic 39-year depreciation schedule to 20 years. GREETA has strong bipartisan support because it would produce an estimated $1 billion in economic activity and create 40,000 jobs in the roofing industry, as well as strengthen national energy policy. However, more favorable depreciation for building owners who install energy-efficient roof systems is estimated to cost the federal treasury $3.2 billion during 10 years according to the congressional Joint Committee on Taxation.

The increasingly difficult budget situation is making it more difficult to get Congress to approve tax legislation of any kind. Thus, the outlook for enactment of GREETA is increasingly uncertain.

Long-term issues

Looking ahead, it is unclear how President Obama and Congress will address the U.S.' long-term budget issues and growing federal deficit. It appears Congress will not pass a budget resolution for fiscal year 2011, in effect putting off addressing budget issues until next year.

Obama recently appointed a bipartisan commission tasked with developing and recommending policies aimed at reversing the federal debt's upward trajectory. Such a commission presumably will provide some degree of political cover for unpopular spending cuts and/or tax increases that may accomplish this objective. The commission is scheduled to send its recommendations to Congress in November, conveniently after the midterm elections, and Congress is expected to vote on the recommendations.

Although much about how Congress will address our budget problems is unclear, it is virtually certain businesses will be targeted with tax increases aimed at providing more revenue to the government. NRCA is concerned further tax increases on businesses will make it more difficult for entrepreneurs to start and grow their firms, and communicating such concerns to Congress will be an important focus in the months and years ahead.

Duane L. Musser is NRCA's vice president of government relations.