Falling Off the Fiscal Cliff

Crossposted from Democratic Convention Watch

Come 1 January, the Bush tax cuts and the payroll tax cut are set to expire for everyone. In addition, there is something called “sequestration” which will lead to automatic cuts the same day. In certain ways, this is very bad for the overall economy, because it will decrease the amount of money going into regular people's pockets, and thus the amount of dollars they have to spend. Since 70% of our economy comes from consumer spending, people will contract the amount they spend on non-essentials. Unless they're rich, in which case, it won't make an appreciable difference on a day-to-day basis.

In another way, this isn't terrible in the long run, because there will be some initial pain, but it will lead to additional monies flowing into Federal government coffers, allowing for a decrease to the deficit, and potentially more money available to hire people for infrastructure programs and other worthwhile government spending which have an economic multiplier effect of a minimum of 2.5. But initially, the pain, especially to those making $20,000 – $200,000/year will certainly be there.

The House, where money is allocated and where tax bills begin, is controlled by the Republicans, and they are playing a game of chicken. They could accept that the Bush tax cuts remain for everyone making under $250,000/year and sunset for all making more than that, and even cut the payroll tax cut from 2% to 1%. This hurts less, and still is helpful to the economy. But they, in the mouthpiece of John Boehner, have said no. Our president, however, has said that he's willing to let everything expire if the House GOP is unwilling to deal. Shades of Newt and Bubba the Big Dog back in 1995-1996. 

There are a number of things you can do, based on what you want to see happen. First, you can contact your House member. Yeah, I hear you, the GOP is in charge, so what does it matter? First off, if your House member was re-elected, he/she pays attention to constituents and for these members, this means both the 112th and 113th Congresses. Remember that we've won back a number of seats – and they're not done counting. When all is said and done, we'll likely only be 16 – 18 seats away from a majority which is quite a change. This means that Republicans representing purple districts will need to listen so that the 113th is not their last rodeo. If you don't have your Congressman/Congresswoman's phone number on speed dial, click here for contact info.

The second thing you can do is to arm yourself with facts about where the Federal budget monies actually go, and what the options are for increasing and decreasing spending. Later today, I'll have a post up where you can play an interactive game to determine what priorities YOU have, and see how the different proposals affect the deficit. We won the last election on facts and boots on the ground. This is no time to change!

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