At the end of the year, if Congress cannot agree on a new budget, we will supposedly drive off a "fiscal cliff" - and much doom and gloom has been predicted over this. The world will end, we are told, if the Mayan Calendar thing doesn't end it first, on December 22nd.
But like the Mayan Calendar hoax, it is just a bunch of made-up bullshit. The world will not come crashing down, and laws that are made can be unmade, just as easily.
What exactly will happen at the end of the year? To begin with, the Bush-era tax cuts will end. This means your marginal rate might go up as much as 3% - if you are making over $70,000 a year. But for most people, the actual increase will be less than that, if not in fact zero. And let's face it, 3% isn't exactly an end-times scenario.
In fact, the tax rates will be the same as during our last period of sustained prosperity - the Clinton years. Bush cut taxes and the economy tanked. Is there a connection? Perhaps. It started the whole debt ball rolling, which inevitably lead to the market crash that lead to where we are today.
So, for most of us, the tax revenue increases will be small to non-existent for most working-class Americans. For upper middle-class Americans, there will be a 3% increase. The overall effect of this is to increase tax revenue by over 19% from 2012. This points out how the very rich pay the most income taxes in this country. But income taxes in our country are still low compared to other Western industrialized countries. And no, 3% isn't going to put Warren Buffet or Bill Gates in the poor house.
The other half of the equation is spending cuts. Again, we are told that these draconian spending cuts will destroy the military, as our defense spending will be slashed! Bridges will go unbuilt, and nothing will get done. The whole country will spiral into recession. And all because of a 0.25% cut in government spending.
But what about the legions of people on Social Security who will see their benefits cut? They are exempted from the fiscal cliff.
So, do you see where this is going? The "Fiscal Cliff" looks more like a shallow ravine, and we have a fording snorkel. This ain't no big thing.
In fact, it may be preferable to what the GOP wants. Republicans, depending on which one you talk to, either want no tax cuts whatsoever, or are willing to discuss "revenue enhancement" based on smaller tax hikes or eliminated deductions. Either way, this is a sop to the very rich at the top of our nation's income pyramid.
And what do they want in return? Well, more military spending - or at least fewer cuts than targeted by the "Fiscal Cliff". And one other thing - they want your social security and medicare on the operating table.
So, in other words, any "compromise" to keep us from driving off this "cliff" is likely to be a worse deal for you, the elderly retiree, or the middle-class person hoping to someday retire. If you are a middle-class American, the cliff is the best option.
But will this cause recession? Perhaps, perhaps not. Alarmist talk, as I have noted before, is always used to get people riled up. The theory is, this 3% increase in taxes will cause people to spend less, and the 0.25% cut in government spending will cause hundreds of thousands of layoffs. Do you believe that? Really? The deal is, you don't get elected to office by saying things could be better. You have to say they are in crises and thus the politicians manufacture one crises after another.
And this crises was manufactured in Congress. The idea was to raise taxes and cut spending so we could cut the deficit and reduce the national debt. Remember all of that? How the GOP ran on this platform of cutting the deficit and reducing the national debt? Remember the giant "debt clock" at the GOP convention?
Yea, that. Well, this "fiscal cliff" is the best thing going to reduce deficit spending and cut the national debt. Yet Republicans are against it. Why is this?
Well, they are all for cutting the deficit, of course, provided it doesn't cut spending for high-tech military projects that are tossed to Boeing Aerospace and Lockheed-Martin. And they want to raise revenues, but not by taxing the very rich. So they are willing to avoid the "cliff" and go with something that cuts entitlement programs such as Social Security, while preserving tax swag for the very rich and lucrative contracts for defense contractors.
Disclaimer: I am a registered defense contractor, a government contractor, and own stock in both Boeing and Lockheed-Martin.
So, the "compromise" will not get rid of the deficit as fast, nor have any chance of reducing the national debt by one iota until 2020 at the earliest. Oh, and it will mean cuts to you, the middle-class American, who has been saving up money and counting on Social Security, for retirement.
Suddenly, the "fiscal cliff" starts to look like a pretty good deal. Out of the way, Thelma and Louise! We're taking this puppy right off the edge!