Common Sense Conspiracy hasn’t reported much on the so-called “fiscal cliff” for the simple reason that the nuts and bolts of this Republican and Democrat manmade disaster can easily be found elsewhere. So, we won’t spend a lot of time here reporting the news, as we like to say around here. So, we’ll just get straight to our take on a news story that is meant to inspire fear, but might should be inspiring hope instead.
It was reported widely last week in the media that President Obama is willing to jump off the “fiscal cliff” if necessary. Most Americans have no idea what that means. It’s pretty simple, really. The Democrats and Republicans are not having any luck striking an agreement that will stop all of the things that will go into effect (or out of effect as it were) at the beginning of the year. The concept of Obama being willing to jump off the cliff means that he has the resolve to simply stick to his guns and let all of these things, commonly perceived in the media as bad, happen. A lot of economists believe that a mild recession and greater unemployment would be the result. So, at first glance, it makes President Obama look pretty rotten that he would just stand by and do nothing in the face of something that might affect millions of Americans. Well, maybe. Or maybe jumping off of that cliff is exactly what America needs.
A lot of the tax cuts that are part of the so-called fiscal cliff were things that George W. Bush enacted in a flailing post-9/11 economy to try to encourage people to spend more money, thus stimulating growth. Obama not only extended this once already, but even increased it in a smaller amount early in his first term. The question here is does a government that is already viciously overspending really need to continue these tax rates when it needs more money to operate? And are the tax rates going to be that damaging in the current financial picture of the nation as some of these doomsday-ish reports indicate?
It’s a matter of perception. Americans have had over eight years of paying taxes at a certain rate, a rate that is historically very low. If the fiscal cliff scenario happens, Americans will face higher taxes, but in reality, this is just the taxes returning to the rate that Americans were grudgingly paying already in the 1990’s. In fact, the former tax rates before the cuts were the work of Bill Clinton. Now, yes, during Clinton’s time the economy was completely different, so Americans were not as dismayed by paying more, especially with Clinton coming through with some progress on the national budget. This is not a debate about whether the cuts were a bad thing or a good thing. But now, in 2012-2013, can America not stomach going back to paying what it paid during its time of prosperity?
The problem is that we perceive an expiring cut as the government raising taxes, not simply allowing them to return to a previous level. But such is the danger in providing cuts to begin with. Taxes should not be as difficult of a topic in our nation as they are. The bottom line, whether we like it or not, is taxes have to cover government expenditures. If it isn’t, we must either cut back on our expenditures, increase taxes to cover them, or do some combination of both to reach equilibrium. Actually, no. Equilibrium is what should have happened from the beginning. Now we have to actually do better than that and go beyond that to bite back into the money we’ve already blown. So why does everyone keep acting like there’s a magical solution out in the moonlight that will allow us to do all of this without higher taxes? Because that’s not a good way to get elected. And our government runs not on creating solid fiscal policy for our nation but making sure that the people in power stay in power. Higher taxes mean someone has to be the villain, but there are no villains in United States’ politics in this day and age. One side might try to demonize the other, but there is never a true villain. Everyone will smile and do whatever they can to protect their own a*$.
So, what’s the point? Well, no matter what President Obama’s motivations might be, and you can rest assured that he has some, jumping over the cliff might not be so bad. Maybe the nation needs to face up to the problem and start digging its way out rather than continuing to make castles out of sand. Yes, economists’ predictions about the effects of the fiscal cliff might be dire in the short-term, but we all know that these things are inevitable if America is able to right its ship in the long-term.
One of the major differences that Congress can’t overcome is the issue of raising taxes on wealthy Americans. Obama has stuck to his guns on this. But we all should be able to agree that at the very least, wealthy Americans don’t need existing cuts to stay in place. Will middle-class Americans find themselves paying more? Absolutely. But those that are paying more are working and making money, or else they would not be paying taxes to begin with. Can they shoulder a little more of the load as well? Well, they will. What is the alternative really?
Another measure is the termination of extended unemployment benefits. Some feel strongly that this will cause tons of problems. Can the government turn its back on unemployed people? The question is how much did extended unemployment benefits hurt people’s drive to find work. I’d be willing to bet that the unemployment rate could actually go down if these extended benefits are terminated because people holding out for the right job will be forced to get in a job now. Is this a very positive, happy notion? No. But it is a realistic one and one that America has to face up to in order to find real solutions in the future.
Bottom line: it might have to get worse before we can get better. Having said that, if the government devours any of this extra money simply to continue overspending, then any potential benefits of the fiscal cliff will quickly be lost. And that is probably what has most Americans upset over paying more. There is a good chance that this particular fear is completely legitimate.