11/12/2012 4:40:00 PM Publisherʼs Column
Opportunity for us,
Nightmare for politicians
Don't stay up at night worrying about the "fiscal cliff," it is actually a gift from the gods offering our nation a real opportunity to get its financial house in order-if we will ignore the partisan political nonsense and see this challenge through.
We are at a crossroads and have two possible routes forward, one is to continue following the same old route that circles around and keeps returning to this same spot, the other is to strike off onto the other path with which we are not familiar.
Our political leaders are familiar with the circular path to nowhere we have been traveling, benefit from it and are not interested in having us direct them down a different path, so they are trying to preserve the status quo by stoking fear of what they would like us to believe is a potential disaster-the "fiscal cliff."
The "fiscal cliff" is not impending disaster, it is impending opportunity and a chance to move forward with addressing three of our most persistent problems, the national debt, the national deficit and the federal tax code.
Right now, the worst thing that could happen would be for the President and Congress to agree on a "solution" to the "fiscal cliff" that avoids addressing the debt, deficit and tax code by extending the deadline for action again. It was their inability to come up with solutions that led to the creation of the deadline for action now called the "fiscal cliff."
When members of Congress refused to negotiate a solution to the debt and deficit problems in 2011, Congress passed the Budget Control Act requiring creation of a bipartisan super committee to draft a budget plan that would be imposed effective Jan. 1, 2013 if Congress failed to pass a balanced budget before that date. The proposed plan was praised by both parties as a realistic and rational solution to the problem at the time, but neither side adopted it. Congress has failed to adopt a balanced budget, so the budget formulated by the super committee is set to go into effect as the so called "fiscal cliff."
The "fiscal cliff" calls for a realistic and rational system of spending cuts and tax increases that will reduce the national deficit and begin reducing the federal debt. Unfortunately, it does not address the problems in the tax code.
The long term result of implementing the budget resulting from the super committee's recommendations are almost universally agreed to be positive and in the best interests of the nation.
In the short term, however, there is the possibility of a minor recession beginning mid-2013 and probably lasting a few months.
The recession will be short-lived because, when the budget cuts and tax increases go into effect, Congress will be under extreme pressure from constituents to fix the tax code, implement a balanced budget and start paying down the debt. It is quite likely that Congress will respond to constituent pressure in this situation because many special interests will also be applying pressure for action.
We lived with the tax increases that will result from implementing the "fiscal cliff" during the Clinton years, the most prosperous period in our lifetimes, so we can deal with the tax increases while Congress and the Administration work out a balanced budget and a new tax code.
We can also live with the spending cuts required under the plan. There is enough waste in federal spending that can be corrected to meet the real needs of our nation even with the spending cuts, but elimination of profligate waste will not be addressed without a compelling reason such as the "fiscal cliff."
The deadline of the "fiscal cliff" presents a unique opportunity to force Congress and the President to seriously address the national debt, national deficit and federal tax code. Whether they will do that is largely up to us, to whether we demand a real solution or settle for another delay to avoid discomfort.
We owe it to posterity to deal with the discomfort while forcing the federal government to address the national debt, national deficit and the tax code. We must not continue to delay action so these problems get passed on to future generations.
The "fiscal cliff" is not a disaster waiting to happen. We've already had the disaster, we've just put off paying for it. It is time for us to act like adults and deal with the problems we have created. The "fiscal cliff" is our opportunity to do that.