Photo by mith_y on Flickr.com
I was watching my Sunday morning news program and some talking head said the term “fiscal cliff” 10 times before I quit counting and started on the crossword puzzle instead. I really wasn’t going to write about it—I figure that plenty of more important people are talking about it and certainly plenty of better writers are explaining it.
But my son talked me into it. Not with, “Oh Mom, it will make so much more sense if you explain it,” of course not. He said, “Yeah, Fiscal Cliff sounds like a Highlights series. You know, Fiscal Cliff saves all his receipts for his taxes and, Irresponsible Andy writes bad checks.”
While I realize that everybody knows that Fiscal Cliff is not a real cartoon character (well almost everybody anyway) I guess I should spell it out just to make sure you know what’s going on.
The fiscal cliff is like a one two punch to the American economy that basically involves tax hikes and government spending cuts that are going to happen if Congress and the President don’t get off their doofusses and come up with a better plan.
First the taxes, this is what will happen starting January 1:
- Bush tax cuts expire and taxes will go up for most Americans
- The temporary 2% payroll tax cut expires
- The AMT patch is not extended
These tax issues are expected to make everybody’s taxes go up from between $2,000 to $3,000 a year.
Next, we have the immediate reduction in government spending that hits on January. Some of the budget cuts include, but are not limited to:
- a $55 billion reduction to the Pentagon’s budget
- a reduction of payments to physicians participating in Medicare
- substantial cuts to FEMA
- and substantial cuts to the Department of Education
The combination of tax increases and government spending cuts are expected to take $800 billion out of the U.S. economy. That could be devastating to us.
So—what’s next? You tell me and we’ll both know. It’s not like Congress and the President didn’t know it was coming. These issues have been in the works for quite some time. The idea of punting until after the election seems to be standard operating procedure for our elected officials. Now that the election is over, they don’t have a lot of time to fix this mess.
I don’t know what the right solution is, but I do know that this is what’s going to be the headlines for the next few weeks.