Posted by: coastcontact | December 30, 2012

Fiscal Cliff – The Soap Opera Continues

McConnell, Reid point to fiscal stalemate

McConnell, Reid point to fiscal stalemate

Tune in to the political programs on television and radio and all you hear is talk about the Fiscal Cliff.  It’s been a continuing story where missing one or two episodes really means nothing.

My question is what fiscal cliff?

The U.S. government spent $3.563 Trillion in 2012.  The total revenue was $2.435 Trillion.  It does not take a mathematical genius to understand that the revenues will have to increase and the spending will have to decrease. Brooking Institute figures are similar to those provided by the Heritage Foundation.

 The automatic spending cuts amount to $1.2 Billion in one year.  That leaves spending at $3.443 Trillion assuming the budget does not increase one cent in 2013.  Why the whining?  That is hardly a cut.

From The Center for Public Integrity

http://www.publicintegrity.org/2012/12/05/11891/fact-check-facing-facts-fiscal-cliff

Some facts to consider:

  • The scheduled tax increases, if allowed to      take effect, would net an additional $536 billion in fiscal year 2013,      according to the nonpartisan Tax Policy Center, raising more than $5      trillion in 10 years. Nearly 90 percent of Americans would pay more in      taxes, TPC says, with the average increase being nearly $3,500.
  • The automatic spending cuts scheduled to      take effect would cut $1.2 Trillion over 10 years, split roughly in half      between domestic and military spending.       That works out to $1.2 Billion a year.
  • A temporary      payroll tax cut enacted for 2011 was extended      through 2012, but is now set to expire at the end of this year.
  • Tax increases contained in the Affordable      Care Act on upper-income taxpayers will go into effect: a 3.8 percent tax      on unearned income, 0.9 percent increase in Medicare payroll taxes and a      higher income threshold for deducting medical expenses.
  • The Alternative Minimum Tax, which was      designed to make sure wealthy Americans pay a minimum tax, was never      indexed to inflation on a permanent basis.

If all that happened, taxes would increase an average of $3,466 per household, according to the TPC. Middle-income households — those earning nearly $40,000 to about $64,500 a year — would see an average increase of $1,984.  Is this going to stop all spending?  NO!

Once again it’s the whining.  It is the result of this thinking.  You can cut anywhere you want just don’t impact me.

Consider these four likely impacts listed by The Week magazine.

– Higher cost of lattes because a dairy subsidy will lapse.  It appears we have had a dairy subsidy for about 30 years.  Starbuck’s will suffer (maybe). Who knew?

 – The Transportation Security Administration (TSA) will be laying off thousands of screeners at the airports.  That will result in less screening.  It is a wasteful program that has never caught a single terrorist.

– If a deal isn’t reached, and the economy creeps back toward recession, demand for fuel will fall (because presumably, Americans won’t have money to go anywhere), slashing gas prices.  That is a good thing!

– According to Money Morning, during the debt-ceiling crisis last year, there was a 30 percent increase in the price of gold — a cost-climb we are likely to see again should the latest negotiations fail.  Another good thing for all of us that bought gold!

Tough choices are part of life.

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Responses

  1. I agree with the majority of what you said. The only thing is that now in this particular time in our economy will falter and possibly send us back into a recession, if cutting spending happens with safety net programs. Everyone always forgets that for every dollar cut on safety net programs, we actualy lose 77 cents. That is because for say SNAP, every dollar spent comes back at roughly 1.77 revenue. It doesn’t only hurt the poor and instead actually causes harm to all those business that rely on those with money to buy groceries. Cut say TANIF and as an unintended consequence, now we have landlords with no rent being paid. The list goes on and this is just an example of what happens when you cut spending at a time like this. What we need is the added revenue that would come just from raising the tax on capitol gains and carried interest and of course the raise in taxes. Our economy will falter a little with the masses having less money to spend and if you added spending cuts at the same time, in my opinion, could actually crash us into a depression that could take decades to climb out of. It would take longer because we are now a global economy and if our country falls, it will impact the whole world. All common sense and we know by now, that our government doesn’t operate on common sense. Thank you for your article


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