ARBOR WEALTH: Plains Indians, Huey Long and the fiscal slope

Published: Wednesday, November 21, 2012 at 10:34 AM.

 

Everyone from 30A to Sandestin agrees that our federal debt and annual budget deficits are too high. And most folks walking around Grand Boulevard will contend that federal spending has spiraled out of control.  The legislative path chosen to address these issues is the heart of the problem currently known as the “fiscal cliff.”

According to a recent New York Times article by Jackie Calmes entitled “Demystifying The Fiscal Impasse That is Vexing Washington,” the phrase was first used by Federal Reserve Chairman Ben Bernanke.  The nomenclature is unfortunate.

In the same sense that the term “global warming” fails to convey the complexity of changing climates and extreme weather conditions, the “fiscal cliff” isn’t really a cliff. We won’t actually descend off an economic precipice on Jan. 1, 2013, if compromises are not reached; rather, we will slide down a slippery “fiscal slope.”  Either way, it’s an outcome to be avoided.

An unfortunate convergence of events on Jan. 1 is the crux of the problem. If a compromise is not reached, according to The Times, “taxes would rise for nearly every taxpayer and many businesses … a slew of tax cuts — $400 billion for 2013-expire on Dec. 31: All of the Bush-era rate reductions; smaller tax cuts that periodically expire for businesses and individuals; and the 2 percent cut in payroll taxes … which increased an average worker’s take-home pay by about $1,000 a year.”

“Also, 28 million taxpayers, about 1 in 5, would have to pay the alternative minimum tax in 2012, further increasing their taxes … An emergency unemployment compensation program is expiring … Medicare payments to doctors would be reduced 27 percent … The biggest cut would be $65 billion … known as the sequester,” which “was mandated by an August 2011 budget deal … that ended their standoff over raising the nation’s debt limit.”

If your head doesn’t hurt by now, keep reading, and we promise, as the Cheyenne Indians used to say in “Little Big Man,” to cause you a “pain between your eyes.” All of the issues listed above are problematic. The larger question, though, is what kind of impact will such cutbacks have, if enacted, on a very fragile economy.



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