The executive and Congressional branches of Government continue to allow the US economy and thus citizens to continue to head toward what has been dubbed “The Fiscal Cliff”.
So what is the Fiscal Cliff?
Tax cuts were made to provide the economy more liquidity after the terrorist attack of 9/11. These cuts were set to expire several years ago, but were extended due to concerns about the impact on the economic condition of the country. Additionally, as part of raising the debt limit certain cuts were made to both military and entitlement programs automatically if congress could not agree on certain structural changes required to limit future increases in the national debt. This also takes place January 1, 2013 and the process is called sequestration.
Sequestration means to set apart and segregate part of the U.S. budget to be handled in a different fashion than the main budget. Congress’ inability to agree on the way forward puts these automatic changes into effect January 1.
The immediate economic effect will be dramatic with a significant increase in unemployment anticipated if these issues are not addressed quickly by all parties. Following are some thoughts on a way forward from my perspective.
1) President Obama appears set on raising taxes on couples making over $250K annually and individuals over $200K, the house says no and want structural changes in entitlement programs. A possible solution would be to accept some of both positions. Those that are concerned because of the impact on small business owners are right to be concerned, particularly with the potential of added costs to comply with the new health care law and associated medicare surcharge taxes on unearned income that could be 2.8%. So some middle ground may be to raise the amount from $250K and $200K to a higher number, agree in principal to certain tax reforms to be agreed upon and put in place automatically if the President and Congress don’t agree to a more comprehensive plan later.
2) Limits on Charitable contributions are on the table. LEAVE THIS ALONE! Many would still give money, but they can give MORE MONEY if there is a tax offset. In other words If someone in a 35% tax gives a $100,000 contribution that costs $65,000 after taxes. They may now only be able to give $65,000. These organizations have been critical in natural disasters like Sandy in the north east as well as outreach to foreign countries with solutions for everything from medical to clean water.
3) Work together across a table and negotiate. Neither side has all of the answers and they cannot afford to stalemate over this issue. All are responsible for the solution as well as the failure to reach a consensus required to move forward.
So Washington, get to work. The American people elected you to do a job and they have the right to expect you will act responsibly. They voted for the maintenance of the status quo in D.C., but it really is a vote to give everyone involved a second chance to work together, not drag the U.S. economy and citizens through unnecessary hardship.
I don’t expect everyone to sit by the campfire and sing Kum by Ya, but I do expect leadership, civility and working in good faith from the elected people who represent We the People of these United States! Washington, we don’t want a bunch of lemmings but rather that you get a grip on the looming problem, lead and by all means get to work on a bipartisan solution so we don’t fall off of the Fiscal Cliff! The American people and electorate deserve nothing less!