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There is a lot of talk of the upcoming fiscal cliff that is looming if a budget deal is not reached by the end of the year between President Obama and Republicans in Congress. If this comes to pass some disastrous consequences will hit us:
Among them are the end of 2011’s temporary payroll tax cuts — the result of which will be a 2 percent tax increase for most workers.
There will also be an end to several tax breaks for businesses, and changes in the alternative minimum tax (AMT) that could result in more people having to pay — the income range is currently between $45,000 and $200,000 — and higher tax payments for those who do.
Several of these existing tax breaks came from the George W. Bush tax cut bill of 2001, which were extended under President Obama until the end of 2012.
There will also be tax increases for higher income individuals to help pay for the Affordable Health Care Act (so-called Obamacare).
At the same time, spending cuts will take place in more than 1,000 government programs, including cuts in the defense budget as well as social programs like Medicare, through 2022.
But some programs are exempt from the BCA. Those are Social Security, federal pensions and veterans’ benefits.
And if you want a personal picture of how the Fiscal Cliff will affect you personally, here is a calculator to give you a rough estimate. It’s a very rough estimate, but it only takes a few seconds to calculate your rough share of the pain. And it is painful.
To which I shrug and say, “So what?”
None of this is pleasant, but in the larger scheme of things I actually hope that this happens. I know this will be quite painful, but we need to start feeling some pain. Since coming into office Obama has given us the largest tax increases since… George W. Bush. The over $4 Trillion in debt that we’ve added since 2008 is just a tax increase that has not been passed into law yet. No Republicans or Democrats have thrown out any kind of serious plan to deal with this debt. And yes, that includes Conservative hero Paul Ryan.
So I say that it’s high time we start feeling the consequences of our actions. Abolishing the debt ceiling and giving the president a blank check to push us further into debt indefinitely is the equivalent to an alcoholic at the bar telling his bartender that the only way to get his tab paid up is for the bartender to remove any limit to it. To give another example if you have a credit card that’s nearly maxed out and you’re barely making minimum payments call your bank and inform them that the only way for them to continue getting payments is to raise your limit. And let me know how that goes.
Would a trillion dollar tax hike hurt our economy? Absolutely. But do future generations deserve a massive bill / inflation / lower growth? I don’t think that our children and grandchildren should be punished for our sins. And if we are forced to feel the bite of what our government largesse really costs we’ll pay a lot closer to what we’re paying for. Big Bird might be a rounding error, but if we don’t need something we shouldn’t be buying it. The left can join into this as well – I’m sure that there are a number of defense projects they’d like to put into the budget cutting sights. Who knows, we might even get to eliminate programs that are proven to be useless like Head Start.
What if we come to a consensus that we want to keep every single program in the federal government? No problem. We can just use my handy progressive income tax calculation spreadsheet and divide $1 Trillion so that everyone feels pain and the taxes are progressive:
What, you mean you don’t want to pay this tax now? Exactly when are you planning on paying it? Next year, ten years down the road, or just continue to pretend that it’s someone else’s problem? How much? And who pays it? Or do you want to wait until the economy improves? OK then, by how much? What will unemployment and growth rates have to hit? Let’s see your hard numbers. No more empty platitudes about “fair share”, “modest increases”, “reasonable cuts”, or arbitrary percentages. We need a trillion dollars in tax increases to cover our spending, so show me how you’re going to raise it.
If you’re going to talk about reforms or spending “cuts”, then show me a reduction in a dollar amount to cover what you don’t want to pay. If a program’s budget is increasing, slowing its rate of growth is not a cut any more than “eliminating” fictional spending over the next ten years is. To give an example, say I decide I’m going to reign in my beer consumption while watching my beloved Philadelphia Eagles disappoint me as only they can. I can come home next Sunday from The Rhino Bar and tell Sister Babe that instead of consuming my one or two pitchers during the game I consumed four pitchers, but the fact that I didn’t spend extra money for a round of shots I had originally budgeted for it’s a great savings for us. And if I explain to her not to worry about the cost since bartenders were kind enough to raise our bar tab limit that probably wouldn’t go over too well, either.1 Personally, in the short run I’m against eliminating any programs, no matter how expensive or useless. It’s time we understood what we really have to give up to pay for what we think we’re entitled to. It’s not like we can continue to put this off indefinitely.
So you’re not ready to balance the budget? You don’t want to go over the fiscal cliff? You want our economy to improve? Too bad. This is what we voted for, and elections have consequences. And I’m not just throwing this out as someone else’s problem. I work in government contracting, which puts me right in the line of fire. Combine that with the tax increases we’d get hit with right in time for when Baby Bob is scheduled to arrive in January and it doesn’t make for a winning combo in the Brother Bob household. I’d still rather go through hard times now than continuing to put our day of reckoning off and have things get much worse down the road.
Besides, we’ve had it good here in DC for a long time now – I talked previously how it is high time we focused on income inequality in the US. To use some Hunger Games terminology, the districts may be suffering, but life has been quite good in Panem. Having the part of the country that passes down the rules and regulations to tie down the rest of the country as our great growth industry is not, to use a favorite term of the left, sustainable. And we deserve this pain – why should the rest of the country suffer while we’re insulated from it? As for the rest of you outside of the beltway…
Were you cheering the day that Obamacare was passed and now you don’t like that your work hours got cut? Too bad – you voted for it. And evil, greedy corporations aren’t the only ones making this squeeze.
Are you young and were you happy that you’re allowed to now stay on your parents’ health care until you’re 26, or that someone else is being forced to pay for your birth control? And now you’re moving back home after college because you’ve become more expensive to hire and there are fewer jobs out there? Too bad – you voted for it.
And yes, those of us who voted for Romney are not without blame ourselves – we share in this, too.
Mark Steyn recently offered some advice for John Boehner as to how to sell the Fiscal Cliff to the American public:
So, given that the ruling party will not permit spending cuts, what should Republicans do? If I were John Boehner, I’d say: “Clearly there’s no mandate for small government in the election results. So, if you milquetoast pantywaist sad-sack excuses for the sorriest bunch of so-called Americans who ever lived want to vote for Swede-sized statism, it’s time to pony up.”
OK, he might want to focus-group it first. But that fundamental dishonesty is the heart of the crisis. You cannot simultaneously enjoy American-sized taxes and European-sized government. One or the other has to go.
So stop worrying, everyone. We’ll probably see some deal made at the last minute, and if we don’t there’s no need to panic. It’s just our future arriving a little bit earlier than we’d like.
Crossposted from Brother Bob’s Blog
1. In other “Laws of unintended consequences”, dropping this kind of news on my eight month pregnant wife would probably also significantly shorten my life expectancy. Then again, if I could articulate any kind of coherent speech after drinking the equivalent of 20 beers that would be a feat in itself.