Opinion: Falling off the fiscal cliff

Barely three weeks ago, the only thing discussed on every news channel was the fiscal cliff. As the rest of the world was counting down to midnight on New Years Eve, the U.S. Senate was making a deal to avert this “crisis.” Much like Chicken Little, news media believed that the sky was falling. While media sources persistently talked about the “fiscal cliff” in their news reports and stories, very few actually discussed what the term refers to.The “fiscal cliff” simply refers to the end of 2012 when the terms of the Budget Control Act of 2011 were scheduled to go into effect. The Budget Control Act was passed August 2, 2011, in order to increase the debt ceiling, reduce the deficit, and balance the national budget. The plan proposes changes in tax rates, unemployment, Social Security, Medicare and across the board spending cuts.Tax rates for individuals with incomes over $400,000 and families with incomes over $450,000 will rise from 35 to 39.6 percent. The tax rates proposed by this plan will be similar to those during the Clinton Administration, with higher taxes on the wealthy, but lower incomes permanently taxed at the current Bush-era levels. The Bush tax cuts were imposed to allow middle and lower income Americans to increase their spending in hope to stimulate the economy. The hopes in doing this is that spending will continue to be stimulated while still receiving increased taxes from the wealthy.The plan proposes $100 billion in across the board spending cuts, but this will not take effect for two months. The delay will be offset by new revenue, as well as discretionary cuts split between defense and non-defense. The plan also includes a nine-month extension of the farm bill and a full-year extension of unemployment insurance. Social Security will see payroll taxes raised from 4.2 percent to 6.2 percent, undoing a two-point reduction in order to attempt to stimulate the economy. The increase in the amount of taxes subtracted from American’s paychecks for Social Security may help the program prevail longer with the overwhelming number of baby boomers reaching retirement age every day.While the prevalence of the fiscal cliff coverage in news media has subsided, the issue is not done. During the first quarter, the country will again hit the debt ceiling, the same issue that fueled the fiscal cliff dilemma. Congress will have to take action once again, as no decision was made on raising the debt ceiling in their plan to advert the fiscal cliff. With Republicans fighting for spending cuts in Social Security and Medicare and Democrats arguing for higher taxes on the wealthy, the only true solution to avert this “cliff” is for both parties to work together and compromise.The problem with the plan that Congress put into effect in order to avert the fiscal cliff “crisis,” is that their entire “solution” is centered on increasing government revenue rather than decreasing federal spending. While these changes that were put into place may help the economy temporarily, the government must decrease their spending in order to truly restore the U.S. economy.