Almost immediately after President Obama was re-elected for another term the phrase "fiscal cliff" began to spread throughout the media as if the average citizen would know exactly what it meant. I personally had no idea what it meant or what the possible ramifications were, but it seemed as if it was a manufactured dark cloud especially created to prevent the President and his constituents from savoring his victory. It seemed like nothing more than colorful verbiage which conjured up childhood memories of watching the coyote in a cartoon fall off the edge of a cliff after a brief pause in the air. But once I did some in depth exploration, and learned what this idiom actually means I realized that it is relative to anything but child's play.
By the end of this year, which is about a month from now the terms of The Budget Control Act of 2011 will go into effect.
There are many temporary tax cuts that will expire on December. 31, 2012. Among them is the temporary tax payroll cut put in place last year. The result will be a 2% increase for workers, the end of certain tax breaks for businesses, and increase in the minimum tax amount, the end of the tax cuts from 2001-2003, and the beginning of taxes related to the President's new health care law. The spending cuts agreed upon as part of the debt ceiling deal in 2011 will begin to go into affect at the same time.
According to Barron's, over 1,000 government programs including the defense budget and Medicare are in line for "deep, automatic cuts."
There are 3 options U.S. Lawmakers have to choose from.
1. They can let the current policy scheduled for the beginning of 2013, which features a number of tax increases and spending cuts that are expected to weigh heavily on growth and possibly drive the economy back into a recession, go into effect. The plus side is the fact that the deficit, as a percentage of The Gross Domestic product, would be cut in half.
2. They can cancel some or all of the scheduled tax increases and spending cuts, which would add to the deficit. The flip side of this, of course, is that the United States' debt will continue to grow.
3. They could take a middle course, opting for an approach that would address the budget issues to some extent, but that would have much less of an impact on growth.
Congress has had 3 years to solve this problem but because of the political climate namely, fear of President Obama being re-elected, a solution was put on the back burner, along with any concern for average hard working Americans who will be adversely affected by a tax increase. Given the fact that 47% of those who hold congressional seats are millionaires, their blatant, ambivalence doesn't surprise me at all. This, coupled with the fact that it gives the G.O.P an opportunity to get back at President Obama for winning the election, are the only legitimate reasons why no attempt at compromise was ever made concerning this conundrum. It's easy to contribute yet another catch phrase to the American pantheon. One which instill's fear but does not reveal the devil in the details. But in all honesty, law makers are the ones who are pushing us off of the fiscal cliff. Some in a misguided attempt to prove a point at the expense of you and I, and others because they do not want to concede , or compromise, and are willing to sacrifice you, me, our friends, and our families. It seems as if Political Science is much more political than scientific.