Time keeps ticking away. Moving us closer and closer to the fiscal cliff.
So what’s the fiscal cliff everyone keeps talking about?
According to the Federal Reserve Chairman Ben Bernanke, “Under current law, on January 1, 2013, there’s going to be a massive fiscal cliff of large spending cuts and tax increases.”
How did we get here? You may recall all the hoopla over the debt ceiling last year. It was a close call. And the U.S. government nearly went into default.
On August 2, 2011, President Obama signed the Budget Control Act of 2011. This act prevented the debt-ceiling crisis. But the agreement required Congress to form a bipartisan super committee to slash $1.2 trillion in spending cuts over 10 years by November 23, 2011.
If the super committee did not reach agreement on the spending cuts, on January 1, 2013 there would be across-the board cuts with a few exclusions (e.g. military, Social Security). And we’d also see tax hikes go into effect with the expiration of the Bush tax cuts.
Today’s September 24, 2012. And lawmakers have failed to reach an agreement on spending and taxes.
What happens if we hit the fiscal cliff? The results could be dire. Many economists predict the U.S. economy would go into another recession or even worse. That’s why it’s called a fiscal cliff.
But it doesn’t have to happen. To avoid the fiscal cliff, Congress must take action by midnight on December 31, 2012. And make tough decisions on how to cut spending and increase taxes.
Most economists believe we have to raise taxes and cut spending. But that’s easier said than done.
In fact, when discussing the possibility of avoiding the fiscal cliff House Speaker John Boehner said, “I’m not confident at all.”
However, Bernanke has strongly urged Congress to reach agreement. “It’s really important for the fiscal policymakers to, you know, work together to try and find a solution,” he said.
Want to know more about the fiscal cliff? Check out – What is the “fiscal cliff”? A Q&A to find out the automatic spending cuts, tax hikes and the potential impact on the economy.
In my humble opinion, lawmakers have a responsibility to get our fiscal house in order. This means, they must be proactive and layout a strategy to avoid the fiscal cliff that takes into account our long-term objectives. No one said it would be easy.
But we’ve got to work diligently together to get it done. After all, behind each member of Congress are thousands of people. And we the people expect you to do what’s in the best interest of our country as a whole. That’s why we elected you into office.
What do you think about the fiscal cliff? Are you confident Congress will stop it?
Photo: archer10 (Dennis)