The Fiscal Cliff – Fairway Frank Style

My book included 51 issues – but failed to include the “Fiscal Cliff”.  So, here it is; defined and discussed in Fairway Frank’s unique style:

 

Definition:  Last year when the debt ceiling had to be raised, the Republican controlled House of Representatives demanded measures to get the national debt under control before approving an increase to the debt limit.  This demand resulted in the President and the Speaker of the House negotiating a deal to bring our fiscal house to order.  When the “Grand Bargain” negotiations between Speaker Boehner and President Obama fell apart, a bill was passed to create a “Super Committee” of twelve Republican and Democratic Senators and Representatives.  The Super Committee was to craft a bill that would reduce the growth of our national debt (growth not the actual debt itself).  Following the completion of the Super Committee’s work there could be no changes by the remaining members of our robust legislative bodies.  The bill that was to be crafted by the Super Committee would only get an up or down vote in Congress.  If the bill did not pass; mandatory spending cuts (referred to as “sequestration”) would kick in on January 1, 2013.  The sequestration option was referred to as “kicking the can down the road” – meaning that we would fix things later.  Well - the Super Committee failed to craft a bill to be brought to Congress for a vote.  Therefore, the mandatory spending cuts (sequestration) are 26 days away from being reality.

At the time the sequestration option was developed, everybody believed that it was so horrible that Congress would come up with a better plan before it was scheduled to take effect.  At the same time, nobody was thinking about the coincidence of the timing that sequestration had with the expiration of the Bush tax cuts.  Yes, both the spending cuts of sequestration and the Bush tax cuts expiration take effect on January 1, 2012.  The 2% social security payroll tax holiday also expires on that very day – Happy New Year. 

Approximately $600 billion of combined spending cuts increased taxes will affect the economy.  Many economists are predicting that we will fall back into a recession with the unemployment rate rising above 9% again.  By the way, one of the sequestration spending cuts is the elimination of the extended unemployment benefits. This complete mess is now called the “Fiscal Cliff” and we are scheduled to roll over the edge of this fiscal cliff at midnight, December 31^st – what a hangover

Far Left:  The President won the election on the platform of raising taxes on the wealthy.  The tax rates on the upper 2% of income earners ($250K or more) must be increased.  Furthermore, Congress should no longer have control over the national debt.  The President should not have to ask Congress to borrow more money.  Congress acted irresponsibly last year and it resulted in our debt rating being lowered.  And, by the way, we have a couple stimulus projects we would like funded – but only about $50 billion a year to start.  If the Republicans do not agree to these terms we are prepared to go over the cliff.  And, the best part of this is - if we do go over the cliff, everyone will blame the Republicans.

Far Right:  The Republicans retained its majority in the House of Representatives on the platform of a smaller government.  We are willing to generate more revenue by eliminating tax loop-holes for the wealthy – NOT by raising tax rates.  The real problem facing America is spending – spending is out of control.  The entitlement programs already approved by Congress are unsustainable.  We must have entitlement reform and a tax code overhaul.  If the Democrats are not willing to negotiate a framework for overhauling our tax code and for reforming our entitlement programs – we are prepared to go over the cliff.  And, the best part of this is - if we do go over the cliff, President Obama will be staring at the need for another debt ceiling increase and we will be holding all the cards (because we have not learned that threatening to default on the debt of the United States of America is not good for Americans - or for the rest of the world).

From the Middle:  We are screwed.  Buy a parachute. 

 

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It is hard to believe that we have devolved to the point of practicing mutual mass-destruction in our domestic policy making.

My book predicted that the massive amount of negative campaigning would polarize our nation even more than it was before the campaigning began (and, it was already more polarized than I could ever remember at that time).  Unfortunately, I was correct.

For a short duration following the election, there was a cease fire.  I had a lapse in judgment that led me to think that maybe all the negativity had numbed us.  Maybe it had made us (and our elected leaders) realize that we needed to unite and work together in good faith towards the goal of keeping America the greatest nation on earth.  I even wrote a blog entry to that effect.  That momentary lapse of judgment gave me a great feeling of hope.  However, after allowing myself to be fooled into a false sense of hope, this new round of political hostility has brought me down hard.  Words cannot convey the depth of my disappointment.

As predicted in my book, this election has provided no mandate and it has left us adrift at sea without any leaders capable of taking the helm.  Where are leaders like Tip O’Neil and Ronnie Reagan when you need them?  Are they gone forever?  With that said, I still hope that President Obama and Speaker Boehner can muster the statesmanship required to solve our problems.  And, once they do, that they can use that statesmanship and resulting accomplishments to reunite all Americans.  However, to this point, I have not seen any evidence that statesmanship still exists in Washington.

Congress cannot develop and agree to frameworks to overhaul our tax code and to reform our entitlement programs in 26 days.  Heck, they probably will only be working on ten of those remaining 26 days.  Just imagine if the company you work for, or the business you own, or even your family finances were left unattended with such enormous problems – for eighteen months.  You company would have gone out of business, you would have lost your job and/or your family would be destitute.  Congress has known for eighteen months that these deadlines were coming – but they were too busy campaigning to work on our real problems.

Now that the campaigning is over, we Americans do not expect a “Grand Bargain” solution to solve our enormous problems before we are at the precipice.  There is not enough time or creativity in Washington for a true solution to our economic troubles to be developed before the fiscal cliff causes true human hardship.  Therefore, to prevent this human hardship, please just do the stuff that everybody agrees on:

1. Extend the Bush tax cuts for everyone earning less than $250K (without precluding the extension of the Bush tax cuts for those earning $250K in the future through other means of revenue generation);
2. Extend the unemployment benefits;
3. Extend the estate tax cuts;
4. Extend the capital gains tax cuts;
5. Agree on a spending number (a percentage of Gross Domestic Product) where our government must limit its average annual expenditures; and,
6. Agree to future (next year) overhauls of our tax code and entitlement programs (that does not preclude lowering tax rates).

When we had the Clinton tax rates we had a budget surplus.  We have not had a surplus since Clinton was president.  In fact, we have had deficits of over $1 trillion in each of the past five years.  When you look at the numbers, it is clear that the major factor that enabled Clinton to achieve a budget surplus was not higher taxes – it was lower spending.  BUT TAXES HELPED!  During the Clinton years, our government spent 19% of the GDP.  We are now spending 23% of our GDP on government programs.

My book stated that the negative political campaigning would cause Americans to despise the “other side” - and to despise fellow Americans that support the ‘other side”.  This prediction has also, unfortunately, become a reality.  I have felt it in my own family.  This fiscal cliff is not only economically damaging - it is damaging civility.

Please President Obama and Speaker Boehner; start talking to each other instead of at each other through the press.  What ‘we the people’ want is a good-faith, honest effort to put the sacred-cows aside and come up with a plan that will save us from ourselves.  Just some cordial conversation would give us some encouragement.  Do the minimum items stated above to prevent true human hardship.  Finally, please commit to a more civilized discourse.  We the people want to be united in carrying out the solution that you develop for our future.  Mutual mass-destruction is not a plausible negotiating tactic for achieving compromise.

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If you liked the above discussion, you will find my book just as enlightening on fifty-one other issues facing America.  The election is over, but the issues still remain.  The book will give you insight on the problems that still need to be solved and a lot of ideas on how to solve them.  If you read the entire book, you will learn how you can be a part of the solution.  The book is a quick read.  This blog entry is about 1,600 words – the book is 24,000 words.  That means the book is about 15 times longer than this blog entry – it is an easy, refreshing read!