Who is threatened by the Fiscal Cliff?

We’ve been hearing about the, so called, fiscal cliff for about a year and a half now. According to various reports the U.S. economy could fall into a recession if Congress does not act by midnight today. This clearly wasn’t important enough to cause our elected representatives to act to avoid the deadline they set for themselves more than a year ago. The combination of the extended amount of time available to anticipate the deadline and the potential threat associated with the failure to act makes me question the whole idea that this is a real problem.

 

When Congress set this deadline for themselves it was presented as a way to ensure future action to avoid dire consequences. As the deadline approached a great deal of press was devoted to talking about the potential impact on the economy if no action was taken. Some of the key points of the legislation Congress set in place will cause temporary tax cuts to expire and cuts to military and social programs. While the cuts to Social Security and Medicare are troubling, the military routinely receives funding in excess of their budget requests.

 

When the Bush tax cuts were originally written into law it was known the cost of the revenue cuts would go directly to the Federal deficit (Suskind, 2004). The tax cuts were set to expire at the end of 2010. These tax cuts have already cost the taxpayers more than a trillion dollars and have been extended multiple times. Each time they are extended the cuts are presented as a way to save the taxpayers’ money rather than as an increase in the loan burden taxpayers are already carrying through the National debt. The temporary cut in Social Security revenue adds to the decades long practice of underfunding the program. It is important to note that everyone receiving Social Security retirement benefits in the coming years was alive in 1960; this is not a new problem. Given the fact that wages for the 99 percent have been flat for more than 40 years and that corporations continue to make record profits, it is unclear who is included in the economy that is potentially threatened by going over the “fiscal cliff.”

 

The biggest potential threat to going over the fiscal cliff may be that Congress will be exposed to a level of accountability they have not needed to address in recent years. While the cynical side of me expects Congress will simply roll over existing (flawed) legislation I would like to see the patchwork of temporary cuts and stopgap measures expire so Congress can address them directly.

 

The Price of Loyalty: George W. Bush, the White House, and the Education of Paul O’Neill. Ron Suskind. 2004

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