United States Fiscal Cliff
I think this subject deserve a thread of its own. This is such a fascinating topic.
To Summarize for those of you who don't know what it is:
- Currently US has a 17 trillion dollars in debt and it is continue to increase ( interconnected discussion of debt ceiling is left out for simplicity).
- A baseline yearly addition to the debt is about half a trillion dollar
- During president bush era, with bush's tax cuts plus extentions, that half a trillion dollar addition to the debt each year became an addition of 1.1 trillion in debt yearly as US is missing out on revenues.
- Bush tax cuts is to expire in 2013, and congress has a deal that says, if we don't do anything to address this deficit, there is an automatic tax increase for everyone (to go back to Clinton era prior to the cuts) along with some spending cuts over 10 year period.. that will stop the addition of that extra 600 billion dollar debt each year.
So, that automatic reduction will kick in because we created a cliff of debt and now "going over the fiscal cliff" and gonna fall. Note this is simply slowing the debt accumulation, not reducing it.
So who cares if this automatic cuts and tax hikes take place, not a bad plan yeah? well the consensus is it will cause unemployment to go up as people will be tight for money, will spend less, also many government jobs would be lost from spending cuts.
How to solve this problem:
1. Increase Revenues for US (via tax)
2. Cut spending (dont spend money that you don't have)
Obama (democrats) favors revenues. Wants to tax the "rich" while keeping tax cuts intact for the middle and poor.
Republicans on the other hand favors government cuts in spending, particularly in entitlement spending where rich gotta take care of the poor, pay less taxes and basically stop giving free money to the poor.
It's a class warfare. So how do we flatten this fiscal cliff? Who can fix our economy?