Following the reelection of Barack Obama, the rhetoric coming off of Capitol Hill concerning the “Fiscal Cliff” has been extremely high; but what’s all of the commotion really about?
The Fiscal Cliff is a series of automatic spending cuts to all levels of the federal bureaucracy (mostly defense) in addition to automatic tax increases. You may have also heard of the fiscal cliff as a sequestration.
The Democrats in Congress want to resolve the “crisis” by raising taxes on the upper tier of taxpayers in order to raise revenue. The Republicans, however, do not want to raise taxes on any Americans while they would like to make reforms to entitlement programs (but have offered no real solution to the revenue shortfalls in their plans.)
On November 9th, the President’s first address to the media following his reelection, he declared that he would veto any legislation offering tax cuts to those making more than $250,000. This means that the President doesn’t want to extend the Bush Tax Cuts any further.
The President’s position has put Republicans in between a rock and a hard place. They don’t want to raise taxes on the wealthy, but the President is basically giving them no other options.
For the past three Sundays, Bill Kristol has insisted that the Republicans in Congress should compromise with the President and submit to raising taxes on the wealthy. Remember now, this is the same man that thinks the Muslim Brotherhood is a moderate political party and the Arab Spring wasn’t real.
Bill Kristol is by all accounts a dope, and no one on Capitol Hill should heed his “advice”.
However, I do have a suggestion for the Republicans – just let the President lead America straight off of the fiscal cliff.
By coming to any agreement, the media will portray the President as the hero and the Republicans the enemy – it’s a lose/lose for the Republicans, so just let it happen.
The facts of the matter are that no matter what happens and no matter what deal is agreed upon, America will head over a fiscal cliff.
Any freshman macroeconomic major will tell you that when you raise taxes on those who already fund the government the most (excluding China of course), you are asking for more problems than you ever originally bargained for.
Raising taxes on the wealthy may lead to short term gains, but it will create bigger problems in the long term.
If the Republicans let the President have his way, I can see two good things that come from that, aside from the many bad things.
First, every single taxpaying American will feel the effects of the President’s arrogance and liberal bias. As long as you’re a taxpaying American, your taxes will be going up. Americans don’t like their taxes going up, so that will not bode well for the President.
Secondly, there needs to be spending cuts in the government. This fiscal cliff is the only foreseeable way that spending will be cut. Instead of having politicians examine the budgets of every department of the federal government, having across-the-board cuts will force the bureaucrats to cut spending in wasteful areas.
Finally, I just don’t understand why the President doesn’t negotiate going back to the Clinton-era economics. After all, the Clinton era was so magical, and there were no problems then, right? All we’d need to do is raise taxes across the board and cut federal spending beyond any level that is currently perceived to be possible.
Either way, the next month or so left before the sequestration is to take place is going to be quite a divided time for America, aside from the Lame Duck session of Congress.
I don’t want to see taxes raised on any American; but sadly, this looks likely. And for that, we should all thank Barack Obama, John Boehner, Harry Reid, Mitch McConnell, and Nancy Pelosi.
Photo Credit: Medill DC (Creative Commons)