The Fiscal Cliff– What It Is– Why It Would Hurt The Economy– And What You Can Do

In Brief…

                On January 2, 2013, the Bush Tax Cuts are due to expire and automatic spending cuts (Sequestration,) go into affect, translating into a 4% or 5% hit to GDP.  This could cause major slowdowns in financial markets and the overall economy.  President Obama and Vice-President Biden have voiced that renewing the Bush Tax Cuts is not likely (unless Congress hits upper earners with higher taxes-)-  and expired Bush Tax Cuts mean that Americans may pay as much as 39.6 % tax  in addition to other national fiscal concerns.  Plus, capital gains and taxes on stock dividends will go off the chart.  CEO’s from large companies have alerted the President and Congress that the Fiscal Cliff could knock the economy into recession, as well as another downgrade of the U.S. credit rating.  The current administration does campaign  “redistribution of wealth,” which the Obama ticket ran on in 2008.  –What exactly will the Fiscal Cliff mean to the country after January 2, 2013?  And what steps can Americans take now to address the outcomes?


          The few news programs that talk about the Fiscal Cliff are trying to get our attention about what could possibly set back the American economy, even after such a paltry 1.9% growth for 2012.  And 2011 showed even less growth—so any increase in inflation, interest and debt combined with a slowdown in GDP (total goods and services in the market,)  could send the economy into a serious slowdown.   To make reality worse, this 1.9% ‘growth’ is accounted for by government spending: not free enterprise.  The difference?  Government spending is just that: spending.  But capital investment spending in free enterprise business is truly investment.  Well-planned investments are expected to give a return on investment.  Government spending is just money spent.  Period.

With the expiration of the Bush Tax cuts, these January, 2013, tax increases not only hit income, but taxes on capital gains, dividends, estates and more.  The impact of these could be between $300 billion dollars to $600 billion dollars–  in addition to slowdown of GDP.

Economic indicators can seem at first glance to signal an increase in economic upticks, including the recent reduction of unemployment from over 8% to 7.8%–  but economists remind us of the fallout from reduced “participation rates,” or, the growing number of those unemployed who have given up looking for work.  Given that the sequestration (elimination or partial elimination,) of unemployment benefits is looming with the January Fiscal Cliff momentum, the unemployment ‘good news,’ actually indicates a no-change.  Plus, a study by the National Urban League with the Pew Charitable Trusts’ Economic Mobility Project, shows that “Four Years Under Obama Wipes Away 30 Years of Black American Gains,”

Not only have Americans of all socio-economic levels been hard hit over the last 4 years—declining home values, foreclosures, loss of income, stalling economy—but with the looming fiscal cliff, we may yet see more economic devalue added on.  And what’s troubling about this study is that middle class Black Americans, especially, are seeing a 13.4% unemployment and youths are seeing way higher unemployment rates.   Keeanga-Yamahtta Taylor, 40, a doctoral candidate in African-American studies at Northwestern University, who told the Chicago Tribune, “A generation of wealth and assets are evaporating, and the presidential  candidates aren’t making a peep about it.” 

On top of all this, sequestration could also mean further reductions in economic growth.  FCW, The Business of Federal Technology, reports: “it is still far from certain that the 10 percent, $1.4 trillion across-the-board cuts to federal spending will actually kick in on Jan. 2.  And directives from the White House and Office of Management and Budget have reinforced that sense of mere possibility, offering little in the way of concrete guidance for agencies to prepare for the so-called fiscal cliff…”

Economists agree that sequestration, in addition to the expiration of the Bush tax cuts, would combine to spur America into another segment of recession–  it’s ain’t good, folks!  America–  the world!!–  CANNOT afford more recession.  Plus, what we need are concerted EFFECTIVE fiscal policies, the world over!  Let’s not re-build lousy policies in our global economies!  At 1.9% or 2% quarterly growth to our economy this past quarter, keep in mind that most of that figure represents more GOVERNMENT SPENDING!  This is not a sign of the CPI (Consumer index,) which represents a finger on the pulse of growth.  It is government pumping MORE FAKE/printed funny money into our economy disguised as ‘growth.’  No-no!  T’ain’t so!  Just more voodoo-math…. And remember it was President Obama on popular late night T.V. who told Americans and the world that he didn’t get past 7th grade math.  Not good.

Apart from potentially flailing ourselves over the fiscal cliff in 2013 with counter-productive economic policies– plus the president’s own admission to his low math acumen– we must remember that in 2008, Obama campaigned on a Redistribution of Wealth platform.

Many constituents were thrilled with Obama’s redistribution philosophies, including the 32% increase of welfare spending.  But, again, once this money is spent, that’s it: unlike free enterprise business, which spends it’s capital investments in order to receive a return on investment.  The difference between these two expenditures is night and day.  AND, as an affirmative action student who went to Columbia and Harvard Law School, I cannot figure out why Obama supports redistribution of wealth anyway–  when he, himself, benefited immensely from affirmative action opportunities with his Columbia and Harvard Law School education.  Although, he’s admittedly not strong in math.  (see minute: 3:14 within 5:01)

Of course, a president who admits to having very little math comprehension, does not instill much confidence when he touts his supposedly sound economic policies–  and attacks the other guy for his math!!  How would Obama know the difference between a good economic policy and a lousy one?

Apart from President Obama’s admittedly poor math comprehension, I know first hand that re-distribution of wealth punishes high-achievers.  As a 12 year- old, I spent every Saturday morning vacuuming the house, dusting, waxing the dining table and chairs, washing the kitchen floor, and doing my laundry.  My big sister did boopkus: but I was paid less allowance!  Was that fair?  Until her last day, sis didn’t know the value of a dime, let alone a dollar.   Money is a form of appreciation, and sis didn’t appreciate money at all.  It just slipped through her fingers like water.  Re-distribution of wealth does not work: but creates a cycle of dependency– the Congressional Research Service’s 10/18/12 report, “Welfare Spending Soars Under Obama,” touts a 32% jump in welfare dollars spent on needy Americans–  to a whopping $746 billion dollars, which is more than we spend on defense!

The report goes on to say that the expansion of President’s Obama welfare is “…that more people are qualifying in the weak economy, but the federal government also has broadened eligibility so that more people qualify for programs.”  With this fact, I am left to wonder that the more we spend, the more we must borrow, since our spending has outpaced our revenues.  Yes, Obama inherited the debt (even though he asked for the job—) but Obama has doubled the national debt.  Expanding programs such as these adds to the debt he’s incurred.

So, if its true that more Americans qualify for (broadened eligibility requirements,) in this WEAK economy, why the heck would the government NOT extend the Bush tax cuts and stop sequestration??

So, what can Americans do to stem the tide of these economic hits?  First of all, pay off debt—especially unsecured debt.  Credit card debt will soar if the fiscal cliff, in fact, happens.  Interest rates will bounce…. And credit cards add as much as 7.9% or more on top of the prime rate.  Secondly, dump the debt.  Try to renegotiate fixed rates: do the math first, before taking the deal, whatever it is.  And finally: cut your spending, live within your means and sock the cash away.  Learn to eat at home, cook soup and brown bag it.  It doesn’t matter that banks give you boopkus for interest on savings— liquid cash is still green.  And tough days lay ahead.

One final suggestion: study the governmental process.  The Congress, Executive and Judicial branches were designed by the Framers of the Constitution to work via citizens’ petition.  Petition the government!  Tell them what you think!  And to do that effectively, one must understand how exactly they work.  America, learn how your government works!

The fiscal cliff doesn’t need to happen–  in fact, President Obama CAN prevent this RIGHT NOW.  And if Romney wins, write and tell him to put off sequestration and the extend the Bush tax cuts–  and CREATE concerted, sustainable economic policies for today and the future!  It is time for Congress to serve the people of this country—and the President, too—  without any more political game-playing and pandering to the media.

Stop sequestration NOW!!  Extend the Bush Tax Cuts NOW!!

Read the facts yourself… and you decide—

Be an informed voter!  Thank you.

©  2012

©Suzy Right 2012

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