For years we have all been saying how badly we need to “cut government spending and raise revenues so we can fix our country. Government is too big and there is a spending problem.” To help work toward “fixing” the problem Congress passed the Budget Control Act of 2011, which mandates certain cuts to government spending in exchange for there being several debt ceiling increases over a period of time preventing debate each time it needs to be raised. This bill was passed in response to a congressional vote to raise the debt ceiling, which any other time was a standard procedural vote. However, now it is a major partisan fight that resulted in S&P downgrading the United States credit rating.
At the end of this year it’s time to pay the piper and finally begin addressing all of these issues that most voters say are so important to them such as, government spending, debt and deficit. However, instead of preparing for this event as best as we can and working to mitigate the impact, it is being called a “fiscal cliff,” that politicians say will put us back into a recession. Are they not the ones who about a year ago passed these bills in the first place to fix the issues? Why did we let them off the hook by sending six of every seven incumbent’s right back to the House of Representatives in the 2012 elections? Politics at its best, right? Why did they pass the Budget Control Act only to turn around and paint it as a disaster that will hurt all of us a year later? My point is that Congress should have dealt with this properly from the beginning, staggering the impact from each individual law, having each new one take effect or expires six months later.
Beginning in January, what are called the Bush era tax cuts will expire. At the same time new taxes related to the healthcare plan take affect and the cuts from the Budget Control Act of 2011, will all hit at once. In addition, the temporary payroll tax cut from last year will expire resulting in a 2% payroll tax increase. Social Security, Medicare, and Federal pay are exempted from the act. Over 1,000 government programs including defense will automatically see cuts. The current scenario would raise revenue/taxes by almost 20% but only cut spending by less than 1%. That is outside of the Budget Control act though.
There are a few options on the table but when we hear our politicians on TV essentially both sides are still saying “the other side won’t work with us.” I feel like it is pointless to say anything in criticism to either side because we just voted to send them all back. President Obama wants to only let the portion of the Bush tax cuts expire that would have those making $250,000 or more paying a higher tax rate and those making less continuing under a permanent tax cut. The House Republicans will not agree to raise tax rates but will agree to some form of new revenues.
If the tax cuts, spending cuts, and new revenues are not staggered appropriately it could hurt for a while. Nowhere will this be seen greater that with Southern Maryland’s small businesses. In the face of paying higher taxes for themselves and their employees you can almost guarantee that, at a minimum, hours will be cut and full-timers may face some part-time hours just in the face of potential risk from the cuts and taxes.
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