In two days it will be the first of December. It marks the first of a month filled with holiday music, gift giving, jingle bells, hot cocoa, snow – the list goes on. But this year puts a whole new face on the excitement of the holiday season. It also marks the beginning of the last month before we, or rather, our economy, could plunge disastrously off of a cliff. A cliff affectionately named the fiscal cliff.
Falling tragically into the abyss which lies beyond this fiscal cliff is inevitable, unless, by some act of brilliance, our elected officials can overcome their many differences and find a way to compromise. Talk about a holiday miracle.
If you don’t know what I’m talking about, let’s start off by saying that it has to do with that word we have all come to fear and despise: recession. You see, currently our congressmen and women are working furiously (we hope) to save us from this fiscal cliff that we our heading towards. And yes, it is as treacherous as it sounds. Metaphorically, if you were standing a few feet away from the edge of a precipice, and someone was pointing a gun at your head, telling you to keep walking forward, and the ONLY way for it to stop was for this anonymous person to mercifully put the gun down and let you venture back into safe territory, THIS would be something close to the situation our country is in currently. In this scenario, you would be the state of our economy, the free fall off the cliff a devastating recession unlike even what we’ve already seen, and the gunman would be, surprisingly, our very own lawmakers.
So how did we get into this perilous dilemma you might ask? That’s a good question. Well, it all started in 2001 when President Bush and the Republicans in Senate pushed through a bill with only a simple Senate majority using a legislative tool called reconciliation. (Reconciliation in the Senate means that debate of a budget bill is limited to only 20 hours.) The bill involved a 10-year $1.7 trillion tax cut. This bill was supplemented with another round of tax cuts 2 years later, again passed with reconciliation, and also to expire in 2011. After the 2010 midterm elections, President Obama struck a deal with Republicans in congress to extend the tax cuts another two years in exchange for additional tax measures including a tax cut on payroll. The problem then arises from of a deal made in August in response to the debt-ceiling debates. Because no bipartisan agreement was made for deficit reduction last year, the deal requires an automatic $109 billion to be cut from various government programs. Woof.
To un-complicate things, the debate around the fiscal cliff essentially comes down to the appropriate way of reducing the nation’s debt. In the simplest of terms, while Republicans favor widespread cuts to government programs, Democrats prefer higher tax rates.
So what are we doing about it? President Obama has set a deadline for the deal by Christmas, so that “American families, American businesses have some certainty going into next year. And if we get this wrong, the economy is going to go south.” Looks like our commander in chief has quite a wish list this year.
