Photo via of house.gov.
Fiscal Cliff – sounds ominous, doesn’t it? Personally, I haven’t been following the recent discussions as closely as I usually do, because the back and forth between Congress and the White House and Democrats and Republicans has been a lot of pointing fingers, disagreement and overall stubbornness. I imagine this whole scene as a bunch of children doing a whole lot of arguing debating back and forth, with bouts of plugging ears and shouting, “Na, na, na! I can’t hear you!” But then, I am told I have a vivid imagination, so who knows?
Anyhow, short of dedicating an entire post to the leadership’s incompetence, I’d like to address the more pressing concern – the much discussed Fiscal Cliff. I’ve been asked several times what it was exactly, so I thought a short post is in order before the U.S. either plummets to its fiscal death at midnight tonight or (fingers crossed and prayers issued) finds its wings and soars to astounding heights.
Fiscal = monetary, economic and financial policy. Cliff = the end of everything. Put those together and you get the U.S. at a place where some tough decisions must be made.
The Fiscal Cliff explained in 70 words:
The U.S. is reaching its credit limit. For years, we’ve been spending more than we’re taking in, putting us deeper in debt. Think double, even triple, spending for every dollar in revenue. Now, Congress and President Obama have to agree where to cut spending and where to increase revenue. In simple terms, we need money and it has to come from either spending less, making more, or combination of both.
Here are some of the issues on the table:
- A lot of our country’s income comes from taxes: payroll, income, estate, etc… In 2001, and later in 2003, President Bush enacted temporary tax cuts to help Americans weather the recession. These “Bush-era tax cuts” are set to expire in a few hours, meaning if Congress doesn’t decided otherwise, every household in the U.S. will see some sort of tax increase at home and/or at work. President Obama has called for an extension of these cuts for households making under $250,000, but this threshold is a hot topic of discussion, as some Congress members (particularly Republicans) demand a higher threshold of $450,000 for individuals and $550,000 for couples. Also in discussion is taxing inherited estates – proposal is to increase rates slightly.
- What does this mean for me?
- As of right now, it looks like most of the tax cuts may be extended in some form, particularly the above mentioned income tax cuts.
- The hottest spending cuts discussed include: Social Security, Medicare/Medicaid, defense spending, and unemployment insurance. Pretty much, Congress has to determine which of these budgets to decrease in the coming years. Cuts will be made though, so stay tuned!
- Update: GOP gave in on Social Security cuts – the formula calculating the increase in SSI each year according to increases in cost of living is being adjusted – limiting the impact inflation has on any adjustments. This means that if you receive SSI benefits, your annual increase will be a bit smaller in the future.
Regardless of the outcome, someone will end up hurt, disadvantaged, angry, etc. But, isn’t that the point of leadership, to make the tough calls and weather the consequences?
Congress and the White House must reach some type of agreement today – they are starting yet another session today at 11 a.m., so updates are expected throughout the day as voting ensues on proposed amendements (If you’re a political nerd like me, you can Watch the proceedings live here).
But, even if any decisions are made today, the Fiscal Cliff won’t go away any time soon. The problem seems simple enough, but working out the intricacies of the solution will take some time. I’ll be tweeting adn RT’s updates as they come in so follow along!
Happy New Year’s Eve!
The Fiscal Bill passed by Congress earlier this month calls for some tax raises. You can calculate your 2013 tax bill using this handy dandy calculator courtesy of the Wall Street Journal.