The Fiscal Cliff(hangar)

Even as we immerse ourselves in the ups and downs of the upcoming Presidential election and worry about the financial ups and downs of the European Union, we are barely aware of the so-called Fiscal Cliff that is ahead of us in January 2013.

Without government action by January 1, 2013, a variety of tax increases and spending cuts will automatically occur.  This combination of events has been dubbed the Fiscal Cliff.  Among these actions that will occur are the automatic expiration of the Bush-era tax cuts and the automatic imposition of over $1.2 trillion in defense as well as other spending cuts.  These spending cuts were agreed to as part of a short-term package agreed to last year by Congress in their deal to raise the debt ceiling – also a cliff-hangar decision.  Although the total amount of these spending cuts would be spread over 10 years, most economists agree that the immediate impact in 2012 would be huge – a loss of jobs in the manufacturing and defense  industries that would create a  big drag
on the economy.  The Congressional Budget Office reports that if the tax cuts end and the spending cuts occur as mandated now, the country will likely be pushed back into a recession.

News organizations tell us that there may be a plan to, once again, postpone the decision of what to do by three months until March 2013. In any case, it seems that lawmakers have no intention of dealing with the real issues of the Fiscal Cliff until after the Presidential election. That leaves less than two months of a lame duck Congress to come to a solution.  Not a likely scenario.  Once again, “government by deadline” is Congress’ governing method of choice – just postpone until the deadline and then extend the deadline.