By Kevin Price
The
so-called "fiscal cliff" has dominated the news ever since the
election ended, but it has hung over heads as a threat to the economy for much
longer. The "cliff" is a combination of tax increases (created by not
extending tax cuts that currently exist) and several deep spending cuts (passed
by the Congress and signed into law by President Obama last year). The tax
increases will be over $500 billion and the cuts
in spending will be in the billions and will potentially affect every area of
government. Most economists on the left and right believe they could be a cause
of economic ruin, but both the president and Speaker Boehner, oddly, have their
own reasons why they might like to see it happen.
During the
debates, the president told the audience flatly that the "fiscal cliff
would not happen." In the last few weeks, he has begun playing a bold game
of chicken and has made it clear he is ready to jump. Meanwhile, House Speaker
Boehner has consistently said such a thing cannot happen. He has offered
several counter proposals, including one endorsed by moderate Democrat Erskine
Bowles, the former Chief of Staff for Bill Clinton and best known recently as
the co-chair (with former U.S. Senator Alan Simpson (R-WY)) of Barack Obama's
National Commission on Fiscal Responsibility and Reform that was formed to
provide a serious attack against the problem of government spending. That
proposal by Boehner -- as well as all the others -- was rejected by President
Obama. Obama is committed to making sure the most affluent have a tax increase
and seems willing to do it regardless of the consequences.
So Obama has shown his willingness
to face the cliff, but why would Boehner want to do it? It is certainly
contrarian for the GOP to acquiesce on such tax increases, but one of the
biggest complaints Republicans have had in recent years and particularly in the
last election is the huge number of voters who do not pay federal taxes
directly (although they certainly do in the costs of goods and services they buy
from companies that pay taxes). If the problem is a lack of "skin in the
game" by many voters, what better way of accomplishing that than tax
increases that not only will affect the most affluent, but even the middle
class? With the fiscal cliff, individuals making as little as $33,000 and
couples making around $50,000 could find themselves subject to the Annual
Minimum Tax, which has only been for the most affluent in recent years. Sure,
this increase would also be on the wealthy and could, as Republicans have
argued, have a negative impact on job creation and could lead to an exodus of
revenue from the country; but it would also get the attention of all voters
when it comes to taxes and might translate into electoral success.
If something is not done to avoid the fiscal cliff, the
economic future of
this country will likely be very gloomy.
--
Kevin Price
Host
Price of Business on KTEK 1110, PriceofBusiness.com
Home of Bloomberg Radio on morning drive time.
Publisher and Editor in Chief, USDailyReview.com
Contributor for the HuffingtonPost.com
Syndicated columnist whose articles appear on a variety of media outlets.
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