While we celebrated the holidays, our government was working hard on passing a bill to avoid the fiscal cliff. The Newark Star Ledger front page headlines on January 2nd stated; “a 11th –hour bill puts end to fiscal cliffhanger.” Really, if you read the article carefully you would find that what our government passed over the holiday was a compromised bill that was political motivated with questionable consequences to our overall economy. In short, the bill increased the current tax rate for individuals earning over $400,000 a year and couples earning over $450,000 a year. The bill also extended the coverage of the unemployed, blocked the 27% cut to fees paid to doctors who treat Medicare patients, stopped a $900 pay raise for law makers, and headed off a threatened spike in milk prices. This last minute legislation did suspend tax increases on the middle class, but it would be difficult to classify this legislation as a fair and balanced economic breakthrough. As a matter of fact this compromised plan is estimated to add 4 trillion to our current deficit according to the Congressional Budget Office.
During the spring of 2012, the CBO was warning that if nothing was done to prevent going over the fiscal cliff, the country would slip into a deep recession. So did we fix the fiscal cliff problem or just claim we did? The real answer to this question is what did the CBO office really mean about going over the fiscal cliff. Going over the fiscal cliff meant an increase in taxes on everyone and automatic cuts in spending; an action apparently to severe and painful for the country to handle all at once. So did the bill passed over the holidays meet these requirements? While it did suspend the tax increase on many citizens, it failed to reduce spending and actual added another 4 trillion to the deficit. As a result, we are just beginning to address the problem.
The economic slowdown is a large and complex problem complete with paradoxical solutions. For example, cuts in spending like defense means that many people will lose their jobs which is counterproductive to increasing employment, a measurement of increased growth. There are many people in this country on some type of welfare who need government assistance which would be affected by government cuts in spending needed to reduce the deficit. So why should we be concerned over increasing the debt. The danger is quite clear, if the government continues to spend money; additional money will be printed increasing the likelihood of inflation and the devaluation of the dollar. With this trend in motion, your children may wake some day and find the government can no longer pay the interest on the national debt.
What is needed to effectively resolve this problem is an over plan that considered each action on the bases of how the timing of the action specifically affects each group of citizens while at the same time moving forward on slow but deliberate course of action. The question is whether this government with its current group of arrogant leaders political motivated, spending time in finger pointing, divided in actions and beliefs on how to handle the problem, can really pull this off. Then there is the fundamental question as citizens how much pain are you willing accept to remedy the problem; or do you plan to pass the problem along to future generations to handle.
The final answer to our fiscal problems rests with you as citizens. If you decide to ignore the problem, you have no right to complain in the future, but if you take action and give your representatives some sound and practical advice on what should be done, your actions could make the difference.
This article represents the views of the writer and is not to be accepted as solutions to other problems.
Please visit our web-site at Compass Strategies Group.com.
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