Don’t Look Down! America’s Fiscal Cliff
The economy, it seems, may finally be looking up. Consumer spending is rising, unemployment is down (or at least holding steady), and there are more new home buyers now than any time in the past two years. But don’t hold your breath for an economic boost. This is just a temporary respite before the country dives headfirst over the fiscal cliff.
Chances are you’ve heard of this Fiscal Cliff, and chances are even greater that you aren’t entirely sure what the hell everyone’s talking about. Here’s the Reader’s Digest version: the U.S. government has a debt problem. The debt to GDP ratio is approximately 1:1, which means that it would take all the money the entire country earns in a year to pay off the debt the government holds.
When the government decides that it has to pay down its debt, it employs the same tactics a household would use: increase income (taxes) and decrease spending. Here’s where the problem – and the conspiracy – come in. Raising taxes and cutting benefits doesn’t win elections. Politicians, being a crafty bunch, know this. So they invented the fiscal cliff.
The economic apocalypse we’ve been told to fear for months isn’t even real? How is this possible?! Well, first of all, economics isn’t based on fact, it’s based on theory, and theory is just a fancy word for “stuff smart people make up”. But more to the point, last year, when we were all so terrified about the debt ceiling (another made-up term!), both Democrats and Republicans agreed on a neat little plan to reduce the debt and keep their jobs. They drafted a bill that raised taxes back to Clinton-era levels and cut $110 billion in government spending. Because they didn’t dare pass something that unpopular in an election year, they wrote an “automatic” trigger into the bill that would bring the higher taxes and spending cuts into effect on January 1, 2013.
Purportedly this tidy legislation was to serve as a motivation for the dysfunctional politicians on Capitol Hill to actually negotiate a new budget by the end of 2012. This, however, seems suspect. Instead, there are many who believe that the fiscal cliff was created to deflect blame from the politicians. It provides plausible deniability for unpopular policies. For instance, a Republican Congressperson is accused of raising taxes despite his stentorian campaign promises to the contrary. Now he can say: “It isn’t my fault you can’t afford the property taxes on your third home – that rascal Fiscal Cliff made me do it.”
While Eric Cantor, Harry Reid, and the rest of our elected officials spend the weekend making a lot of noise about “saving the country from the fiscal cliff,” remember that they actually can’t wait until it the new budget goes into effect. That means their plan to push through unpopular economic policies and still remain in office will have been a success.
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