An attempt to understand the world of current events, finance and the economy on a level that allows me to teach it. I'm a journalist. Oh and the occasional post about family, life and kids!
Fiscal cliff!! Sounds scary. You’ve heard it on every network news program. You’ve probably seen it on Facebook and if you’re in those circles then you’ve been talking about it with colleagues.
Here I’m attempting to break it down so an individual can actually understand it. Think of it like this: The economy is running along being tough and resilient (after all, we’re American’s right?) This so-called “fiscal cliff” comes up at the end of 2012 and the economy runs right off a cliff and falls down about 100 feet. Why does that matter? Because if it does that then jobs are lost, the unemployment rate rises and the U.S. GDP falls which could send us back into recession.
What does the term “Fiscal Cliff” actually mean? (Disclaimer: As with all posts, this will not deeply analyze every minute aspect. It will give an in-depth overview). SOURCE: Committee For a Responsible Federal Budget.
Okay that all sounds exciting, so what about the real effect on the country? GDP? Unemployment?
First, let’s start with the consequences of continuing down the same path we’ve been on with keeping everything as it currently is. You know, “kick the can down the road a bit.”
Here’s what would happen if Congress allows the U.S. to travel over the fiscal cliff:
Here’s the deal. There are a million different arguments we could all make about this issue and how to fix it or correct it, yada yada yada. We face a very serious situation. If we deal with it NOW, it will hurt a lot of people. If we kick the can down the road again, it will delay the inevitable, which will then hurt a lot of people very badly. Here’s the summary from the Committee for a Responsible Federal Budget:
“At the end of the year, Congress and the President will face what appears to be a daunting choice: either allow the country to go off a recessionary fiscal cliff all at once, or doom the country to large deficits that will permanently slow economic growth and increase the likelihood of a fiscal crisis. Allowing the country to hit the fiscal cliff at year’s end would be a dangerous mistake, but adding $7.5 trillion to our debt by extending the expiring policies and repealing the sequester, without putting the budget on a more sustainable path, would be a travesty.”
“COMPROMISE IS NOT WEAKNESS, IT’S LEADERSHIP”