Alison Fraser: Fixing the economy: We already have bipartisanship, all that is needed now is leadership

WASHINGTON — Will the recovery finally take off next year, or will Americans have to contend with an additional 12 months of sluggish economic growth, stagnant wages and high unemployment?

Much will depend on Washington. While not responsible for creating jobs, government could at least stop making it harder for others to do so.

For Washington, job number one should be to remove the stumbling blocks it has erected in the path of economic growth. Here are five steps to do just that:

1) Fix the fiscal cliff fiasco: The threat of tax hikes slated to take effect Jan. 1 has cast a pall on job creators and investors for most of the past year. Not knowing what their tax rates will be, they've prudently opted to sit it out until they know the score.

Even at year's end, they still don't know what their next tax bill may look like. They do know, however, that it could be horrendous. Expiration of the Bush tax policies, five new tax hikes for Obamacare, and more. It all adds up to nearly $500 billion siphoned from the private sector in just the next 12 months.

If Congress allows that to happen, it will inevitably mean less investing, fewer new jobs and poor wage growth. Step one for improving the job situation: prevent all tax hikes from slamming the economy on New Year's Day.

2) Open all of America's energy resources: One bright spot in the economy is a host of new energy jobs. Places like North Dakota, Pennsylvania and Wyoming are attracting workers from across the country to fill high-paying energy jobs. But virtually all of this boom has occurred on private lands. Domestic energy producers could add more than 1 million new jobs in just five years if Washington allowed them reasonable access to oil and gas reserves on federal lands and offshore. The administration could start by approving the Keystone XL pipeline and ending its de facto moratorium on approving drilling permits.

3) Reform the tax code: Our current tax code is far too complicated. Its countless special interest provisions, distortions and disincentives hold back growth. Reform that broadens the tax base and lowers tax rates can unleash economic growth.

Unfortunately, the tax discussion prevailing during the run-up to the fiscal cliff has focused on raising rates to generate more revenues for the U.S. Treasury. That's a recipe for tax deform. The discussion in 2013 should shift to a designing a pro-growth tax code.

4) End the regulatory assault on business: Washington has unleashed a massive torrent of costly regulations, and dozens more are in the pipeline. New and pending rules threatening to layer on billions in compliance costs only add to the uncertainty engulfing employers. And uncertainty breeds delay in hiring, employee pay raises and new business start-ups.

The most growth-inhibiting regs on the horizon for 2013 are the Dodd-Frank financial regulations, Obamacare infrastructure and numerous global warming rules spewing forth from the EPA. Better to put the brakes on pending regulations and rules and roll back existing ones that are harmful, outdated or unnecessary.

5) Fix the real fiscal crisis: Federal debt is reaching the point where it, by itself, will markedly slow the economy. We must reduce the debt mess, and that will require fixing its root cause: runaway spending — particularly the big three entitlement programs.

Until Washington tackles the real problem, businesses can have little confidence that Washington will ever create a more favorable economic environment. Instead, they'll be left worrying about a Euro-style debt crisis or more ill-advised tax increases. To show it's serious about getting its fiscal house in order, Washington must begin to pursue rational entitlement reform — the sooner the better.

The good news: These five steps are not controversial; many have bipartisan support. All that's needed is leadership.

Alison Fraser is director of the Roe Institute for Economic Policy Studies at The Heritage Foundation.