What is the fiscal cliff?
It seems like there is a great deal of confusion over the term “fiscal cliff”. I hear people referring to the fiscal cliff as being the budget deficit, the national debt, the debt ceiling, the expiration of the Bush era tax cuts and many other financial issues. While these are all important issues, the fiscal cliff is defined as combination of the expiring Bush era tax cuts and major automatic federal spending cuts both scheduled to take effect at the end of this year. What will this do to the economy? I’m not certain. At the very least, decreases in federal spending will reduce economic activity and higher taxes mean less consumer spending. Both point to contraction and some think the negative 600 to 800 bln the combination is estimated to represent might tip the economy into recession. The problem, as I see it, is not the only cliff itself but the rock and hard place that the cliff represents. If we extend the tax breaks and authorize more federal spending to avoid cuts we raise the deficit further, raise the total national debt and ultimately have a higher cliff to drive off of in the near future.
Though I am a Republican, I had the "pleasure" of having lunch with former U.S. Senator Chris Dodd yesterday at the university club in NYC speaking on Dodd-Frank and what’s to come now that we have another 4 years of the Obama administration. I enjoyed hearing his view points and especially enjoyed how candid and non-partisan his comments were on our current economic issues. Dodd was optimistic that the current impotence of the Senate would end and that action would be taken in 6 to 8 weeks, meaning that a cliff solution is possible.
Unfortunately this is not a problem with a single defined solution. This is not a popular opinion but I feel that perhaps the best course of action is to let the tax cuts and spending cuts happen as currently planned. I am happy to pay more taxes if it ultimately lowers the deficit and hopefully leads to debt retirement by the nation. What we will probably see is the Republican side pushing some modified form of tax cut extensions by using the debt ceiling as a bargaining chip. Our government should not be exempt from the logical and responsible borrowing limits placed on all other individuals and institutions. Therefore, as Dodd eluded too, hopefully we see some kind of compromise.
I don't believe I contradicted myself. The expiration of the tax cuts (higher taxes) give the gov't more revenue. Gov't spending cuts let them keep that revenue, reduce the deficit and maybe eventually pay down the debt. Both increased taxes and decreased gov't spending reduce agg demand.
I believe the single defined solution you're looking for is to lower taxes AND cut government spending. You said it yourself that higher taxes means slower economic growth, but where you contradicted yourself was when you said govt spending cuts will slow it too. Where do you think that money comes from? Space? Try American paychecks. The only way to create a surplus is the grow the economy with tax and spending cuts, which will raise the median American income, thus raising income tax revenue. We could tax everyone at 100%, cut spending to $0, and still not be able to pay the debt off in a year. Democrats are thinking too short term on this issue, and I honestly think this issue will never be solved.
The federal government should cut its spending... I don't get why people think you can just spend your way into prosperity...
If Jefferson see the size of the government now, he would fucking rage quit USA...
Long story short: higher taxes and reduced military spending with a projected net budget reduction.
Here's how to interpret the partisan shit:
If you're a democrat, you like this. If you're a republican, you're shitting bricks because you want cuts in social programs and tax cuts.
A democrat will tell you that despite record cash reserves, the 'job creators'.....aren't. They will also tell you that the military is far larger than it needs to be.
A republican will tell you that taxes are too high and nevermind the cash reserves. The military can never be too big, and social programs are the problem.
If the gov't spends less on defense, lots of areas dependant on DOD/DNI/etc spending will take a hit. This is where the fear comes in: how far does this ripple out and how bad will it be, and will the larger economy absorb this shock or be negatively affected. The GOP says it will cause another recession. The dems say it won't.
As for the shape of the public debates: the GOP is terrified of the idea of a democrat reducing spending or the budget, because it deprives them of some of the ability to call them spend-and-tax-socialists, especially if the budget does reduce. Democrats will point out that they will eventually draw down social welfare, but that corporate welfare should be cut first and will frame the debate along the lines of "is the system more important, or are the people in this system more important?"
If the plan fails, Cris Christie will be president in 2016. If it succeeds, we just may see Hillary Clinton in office in 2016. Just kidding. Maybe...
The rest is noise. Place your bets and hold on to your hats.
Please point me in the direction of Democrats who are willing to draw down social welfare. All I saw from the campaign is more spending on education, more spending on health care, no cuts to SS or Medicare, and no cuts to welfare programs.
Personally, I wish the Republicans in the House allow all of the Bush tax cuts to expire, for everyone. Democrats whined for years how much they blew a hole in budget. Well, now's the chance for them to raise taxes and improve the budget outlook. If people complain, they can say they were only doing what the Democrat's wanted. Then the Democrats would have to defend the idea of tax cuts being good for people. Either way it seems like a win-win to me. (The economy is shit anyway so falling back into a recession again seems like a small deal in the grand scheme of things ($16+ trillion in debt. The CBO even reported we would have positive GDP growth in the 4th even if all the tax cuts lapsed.)
I am ok with reducing military spending, if Obama cut defense spending, he is retarded.
Why do we have to justify tax cuts for people? I don't care if rich people burn their money or build a house of gold bricks, it is theirs. We have these arguments of the benefits of taxing this group or that group, but it misses the point that this is their private property.
Imagine me sitting around, eying a neighbor and saying "hey, they never use that tractor, ill just take it and us it". That would be called theft, regardless of the benefit. But when a group of people get together, elect someone to change the law, it becomes "good government". No, it is theft under the guise of law. Instead of a gun and putting your own ass on the line you have the IRS do it for you.
We need to cut government spending and reduce what the government does. No, you didn't build that alone. Roads, laws and national defense helped you. What didn't help you is a nanny state funded by tax dollars.
Cut spending, let people keep more money that they have earned. Let people save, spend, do whatever. It isn't YOUR MONEY.
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