It’s impossible to watch the news these days and not hear about the dangers of the “fiscal cliff.” It will apparently affect the majority of U.S citizens in some way, and the rumors going around is that it will be for the worse. But what is the fiscal cliff, and what does it mean for Generation Y?
First off, “Fiscal cliff” is the term used to describe the situation the government will be in when the terms of the Budget Control Act of 2011 actually go into effect.
This means a few pretty big tax-related laws are going to change at midnight on December 31, 2012. Last year’s temporary payroll tax cuts will expire, meaning there will be a 2% increase for anyone with an income tax in the U.S.
There will also be an end of certain tax breaks (‘loopholes’) for businesses in addition to the tax cuts for rich people George W. Bush put into play in 2001. President Obama’s health care law will also start taking in taxes at this time as well.
Remember how everyone gave Obama shit for spending too much money? So much that they made him sign a debt ceiling deal in 2011 to agree that he wouldn’t spend too much money on government programs?
Well, on December 31, 2012, all the aforementioned laws will go into affect at the same time that the government will have to heavily cut down on spending. This means that over 1,000 government programs, including Medicare and the almighty defense budget are in line for, according to Barron’s,”deep, automatic cuts.”
Sounds like we’re fucked, right? Well, lawmakers have come up with three solutions to save businesses and people from significant financial harm, none of which are very appealing. Here they are:
The first choice is just letting the policies we already have scheduled for 2013 go into effect. They would cut spending and increase taxes for some programs and businesses, just about cutting the deficit in half. Too bad it’s most likely going to lead us into another recession, experts say.
The second choice is the opposite of the first. They could cancel some of if not all of these tax increases and spending cuts, which would add to the deficit and probably lead us into the same hole the European economy is currently in.
The third choice would have the least impact on the government and the people. They could think of a modified plan that incorporates policies from both choices. Nobody would lose too much money and nobody would gain too much money in return.
The government will most likely go with a modified version of the third choice. They will extend the Bush tax cuts but cancel the automatic spending cuts to those government programs. Basically, we’ll put off making any big changes to prevent anything, good or bad, from happening to our debt, budget, businesses and people.
But just in case the government decides to get in touch with their retarded side and go with the first choice…
We’d be totally fucked. The combination of higher taxes and spending cuts would reduce the deficit by about 560 billion dollars, but it would also greatly reduce the amount of money the country makes for itself by A LOT. We’d lose a shitload of jobs (maybe even 2 million), ultimately sending us back to where we were right before Bush left office.
Point being, the government needs to act now and create this modified version of our third choice to stop these scheduled laws from going into effect. All we can do right now is hope for the best, because if the government devises a plan that would stop any of the harmful changes to take place, our lives won’t really change that much.
We’ll continue slowly working ourselves out of the ditch we’re currently in, and even though this is only modest growth in terms of the economy, it’s a hell of a lot more than what would happen if the government doesn’t figure out a way to keep our tax system and government spending the way it is.
That, ladies and gentleman, is the real deal with the fiscal cliff. Thank God none of this happened when those god damn hicks took over the white house.
Sean Levinson | Elite.