We're doing something a little different on WSO this week. Since you can hardly turn on the TV or the radio, or go online without being inundated by stories about the Fiscal Cliff, we thought we'd give the Fiscal Cliff the old WSO treatment. To that end, TheKing and I will be doing a series of posts this week dealing with the two issues at the crux of the issue: taxation and spending. And we'd like your help to put it together. First things first:
What is the Fiscal Cliff? Essentially it's the "perfect storm" of several macro-economic factors colliding all at once early next year. These factors include the expiration of the Bush tax cuts, a mandated increase in the payroll tax, and the violation of the debt ceiling yet again. Thus far, Congress and the President have made half-hearted overtures at getting a deal done to forestall the expected crisis, but as yet nothing concrete is in place. The ramifications of not getting a deal done, or "going over the cliff", include another hit to our national credit rating, a fairly drastic increase in taxes (more or less across the board), and a potential cataclysm in the stock market. The US dollar is already suffering against rival currencies in response to the looming deadline and lack of a solution at the moment.
Anyone who has watched American government for more than 15 minutes knows that this is mostly Kabuki theater; no reasonable person thinks for a moment that a deal won't be reached to kick the can a little further down the road. It's what we do. But that doesn't mean we can't have a little fun with it in the meantime.