Opinion: What does the fiscal cliff mean?
The fiscal cliff frenzy seems to be the latest of Washington’s bipartisan quarreling. President Obama has decided that he wants to end the Bush tax cuts and raise taxes on the wealthiest Americans; all that stands in his way are Republican lawmakers. President Obama launched a campaign of sorts, encouraging voters to contact their members of Congress and tell them how they feel. The idea is to put enough pressure on Republicans that they may soften their stance, and ultimately include raising taxes on Americans earning $250,000 or more in any fiscal cliff deal. Obama’s argument is that the average middle-class family must pay $2,200 more in taxes each year if no agreement is reached in Congress. But where did this all originate?Much of the current debate over the fiscal cliff is found in the Budget Control Act of 2011. Congress needed to increase the debt limit so our fine government could continue borrowing money, but this was met with conservative cries for spending cuts. When an agreement was reached, the debt ceiling increased by $2.1 trillion and a super committee was forced to find $1.2 trillion in cuts over 10 years. Because the super committee could not agree upon what should be cut, starting January 2nd, a process known as sequestration—automatic spending cuts— will begin, and many agree that defense, civilian spending and Medicare will be areas his the hardest. The Bush tax cuts, approved in 2001, 2003 and 2010, expire at the end of this year, and if nothing else were to happen, income taxes would have to increase for middle-class families ($2,200 more in taxes). But the Bush tax cuts aren’t the only tax policies up in the air. The payroll tax, which decreased from 6.2 percent to 4.2 percent because of the stimulus, expires, meaning that a typical worker will be paying an extra $1,000 per year.President Obama has proposed a tax plan that increases taxes for individuals making over $200,000 per year and couples making over $250,000. This would restore tax rates on the wealthy to the rate before the Bush tax cuts, but the plan also proposes increases on estate taxes, as well as capital gains and dividends. The GOP proposal includes the extension of all expiring taxes. In addition, they would like to change the inflation formula computation in hopes to slow the rate of spending increases for Medicare and Social Security. Calling for $600 billion in cuts to healthcare, the GOP also wants to see an increase in the Medicare eligibility age.So what happens if the parties can’t agree? If both parties can’t come to an agreement, recession is imminent. Higher taxes, when paired with spending cuts almost always means a loss of job and production. The Congressional Budget office projects the economy would contract by .5% in 2013 and unemployment would rise to 9.1 percent. With lack of leadership in Congress and in the White House, I have little faith that a real agreement will be made. The script is: two parties bicker back and forth, and one party is forced into submission by the other, creating a deal that is not good for either party, causing even more political polarization and rivalry. Prove me wrong, Congress.