I know I’m a contrarian by nature, but not usually to this degree. I genuinely believe..
..America Is Going Off The Deep End
Once the media gets a hold of an idea and it enters it’s way into everyday conversation, it’s either over-hyped or “not as bad as they say.” In my opinion, the Fiscal Cliff falls into the “not as bad as they say” category.
Picture an average American family bogged down with debt. They have spent the last decade over-consuming. Most of their consumption was financed by (going into) debt, rather than savings. Now that they’re no longer able to use ever-increasing home equity to pay for their wants, they are having to rethink their budget. It’s back to the basics…
The family has (finally) decided to tackle their debt beginning January 1st, 2013. They have agreed to work a bit hard in order to earn extra income. They have also agreed to stop spending like maniacs. This combination of increased inflow and decreased outflow should certainly help the family live within their means.
The family admits that things will be tough, for sure, but their current living standards are unsustainable.
What would you say to this family?
I would expect the common response to be:
- “Hey, way to go guys! You can do it!”
- “I’m really proud of you!”
- “It’s not an easy decision but you’re headed in the right direction!”
The Fiscal Cliff
Now replace the FAMILY in the above example with the US GOVERNMENT.
On January 1st, 2013, a series of spending cuts and tax hikes will automatically go into effect. This will happen because Republicans and Democrats were unable to agree on a plan to reduce our America’s deficit. Republicans didn’t want to raise taxes while Democrats didn’t want to reduce spending.
Maybe the New Year’s Eve ball-drop wasn’t the debt-reduction trigger we were all expecting, but it’s what we need.
It seems obvious that increased taxes and decreased spending is the quickest way to pay down the debt.
But America seems to be opposed to it?
Economists and experts warn that the series of spending cuts and tax hikes would hurt an already-fragile economy.
As I said in the example of the family: “things will be tough, for sure, but our current living standards are unsustainable.”
If we prolong our problems, the recession will only grow deeper…and the Fiscal Cliff will only get steeper.
Photo Credit: Business Insider