The term “Fiscal Cliff” is being tossed around everywhere since last week’s election. You know it’s a big deal when it hits the New Yorker, known to make political satire out of just about any government-induced malaise.
I came across the article today on NewYorker.com, “The Absolute Moron’s Guide to the Fiscal Cliff,” and it spurred me to write this post. What I think few Americans understand is what the looming doom of the Fiscal Cliff means to our economy and how radically it can change. Some say it will be more like a waterslides, slow and loopy but an eventual drop. Others say it will be more like a cliff, a big drop fast. Regardless of what you believe will happen, the fact is that you need to educate yourself of the basics of what the “Fiscal Cliff” means as there’s an important deadline of January 1, 2013 coming up that could change everything.
First, we need to take a ride in the way back machine to the year of 2001, when, according to the New Yorker post,
“George W. Bush signed a massive round of tax cuts that were supposed to expire ten years later, in 2011. President Obama later extended the expiration date to January 1, 2013. After that, your rates will go back up to the rates you paid in 2001. A bunch of other tax changes, like the expiration of a “payroll tax holiday” and the elimination of some tax credits, will also hit on January 1, meaning that no matter how much you pay now, you’ll probably pay more after the new year unless there's a deal.”
So, your question after reading this might be, “Who the heck do I blame for this crazy freakenomics?” The answer is unclear. Do you blame the Republicans for setting a round of tax cuts in the first place? Or do you blame the Democrats for prolonging the decision on said tax cuts to buy time? Regardless of who you blame, if we don’t have a plan and a deal before the expiration date, experts warn of spending cuts and potentially a recession.
Could this fiscal stalemate be Obama’s way to get what he wants in terms of tax hikes? In the words of Voltare, “A long dispute means that both parties are wrong.” Both parties are wrong because no one is right – that’s what compromise, meeting halfway, and making unbiased decisions for the greater good is about.” Let’s see if the leaders of our countries can turn a fiscal cliff into a fiscal decision that keeps our economy from taking a nosedive.
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