On Thursday, October 18, 2012 sixteen executives from the nation’s largest financial institutions (Members of The Financial Services Forum) wrote a letter to our President and Congressional Members warning and urging the ‘powers that be’ to take serious bipartisan action and dramatic movements in the way of solving our long term economic standing.
The letter sites an upcoming “Fiscal Cliff” facing our nation, and the consequences that could be had if necessary measures are not taken seriously and immediately. The referred Fiscal Cliff relates to the problems that will be faced on December 31, 2012 when the Budget Control Act from 2011 goes into effect. The law will effectively end the payroll tax cuts, end specific tax breaks for businesses, and begin the taxes associated with new health care laws.
The letter warns of the dramatic impacts that could face our nation’s economy if our nation’s leaders do not put aside party politics and make the right choices for our country. While the combination of higher taxes and spending cuts would presumably reduce our deficit, it is estimated that the burden would be too costly and would result in a dramatic cut to GDP, sending the U.S. into recession. The letter sites Fed Chairman Ben Bernanke as stating “that the fiscal cliff would push the U.S. Economy back in to recession, and about 1.25 million fewer jobs would be created in 2013”.
Previous party stalemates over the nation’s fiscal future played a significant role in causing a Moody’s downgrade in the United State’s credit rating. Further downgrades could result in higher interest rates, and thus a decrease in Investment. This would also lead to further uncertainty about the handling of our economy and a decrease in Consumer Confidence. The letter sites Doug Elmendorf, Director of the Congressional Budget Office saying “..the economy is already being held back by the mere anticipation of the fiscal cliff and the uncertainty surrounding it..”
In the end we can only hope our leaders uphold the oaths they swore when elected. To protect and fight for the betterment of our nation and its citizens, to put aside political motives and strive to collectively make the right choices – not for themselves, or their party, but for the nation as a whole; for the generations that will come tomorrow, and those who may suffer through today. A recovery will not be sustainable until our core problems are exposed and addressed, and we can only hope that our leaders will work to be the solution rather than an extension of the problem.