US Fiscal Cliff

Democrats & Republicans Face Off

As republicans and democrats continue to haggle over the fiscal cliff, I think most people don't understand what it means or even represents. The 2012 presidential election took focus off the subject for the better part of a month, only really referenced by name and some vague idea of what it was during the campaign. So my guess would be that unless you follow political news closely, you are left with only the idea that taxes will go up and so spending will go down.

I think starting the discussion with how did this "problem" that seems to be bearing down on us come about? Unless you have been living under a rock, most people know that the US has been running HUGE deficits for a number of years. A couple of ways to look at it are: the US government is spending 50% more than it actually takes in or the US government borrowing about 8% of the entire annual spending of the US economy. No matter how you look at it, that amount is enormous. That is like earning 100K a year and spending 150K. No private company or individual could borrow that much for very long before serious problems occurred  So I don't understand why this is not a more serious issue to Washington. I know they talk about it, but really nothing is being done.

The national deficit is now at 16.3 trillion dollars and has risen by 6 trillion since 2008. That ought to make more people worried I would think. The median household income is just over 50,000, based on the debt numbers, all the income of every man, woman, and child would not even come close to covering the national debt. This is to add some depth to the discussion, and give you an understanding of where exactly we are.

Back to the US fiscal cliff. Part of the fiscal cliff comes from the expiration of the 2001 Bush tax cuts.The other part comes from when they actually tried to get serious about the debt and deficit. In 2011 the stuck a compromise that would help to solve the longer term deficit by allowing the government to spend more for a couple years, then make some cuts. The deal raised the debt ceiling and calmed the rating agencies so they would lay off of another ratings cut. Now that the time has come to actually make the cuts, no one wants to actually do it. What will stop them from doing the same here? The answer is nothing. The politicians in Washington cannot be trusted to keep a promise. It is a foreign word to them. There will be no deal that involves spending to be LESS in any year than any previous year.

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