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Last Minuet ‘Fiscal Cliff’ Deal Not Likely to Solve Economic Problems

December 31st, 2012

12.31.2012

Despite the incorrect perceptions by political leadership and public comment, Reuters data shows that the U.S. economy has been slowing in 4 key sectors for months [Chart Credit: Reuters 12-13-2012].

Despite the incorrect perceptions by political leadership and public comment, Reuters data shows that the U.S. economy has been slowing in 4 key sectors for months [Chart Credit: Reuters 12-13-2012].

Last Minuet ‘Fiscal Cliff’ Deal Not Likely to Solve Economic Problems

original article written by Net Advisor

WASHINGTON DC. A last minute deal to “avoid Fiscal Cliff” has been in the works. The only problem, the deal does not address the fundamental issues in the economy.

First a quick analysis of the President’s 12-31-2012 statement.

On 12-31-2012, President Obama said:

“We’ve got to do this in a balanced and responsible way.”

— Barack Obama, on the Fiscal Cliff negotiations, published on Twitter

During college, most of my work was conducting research in social and behavioral psychology. Part of this work included studying the psychology of semantics. Political figures often and carefully craft their key buzz words to make an impression on people. The words often sound good. They are frequently broad in scope, meaning and interpretation. In reality, their actions are not congruent with what they always say.

If we look at the word choices the President used, and then look at what he really means by those words, we find discrepancy.

The President uses the word “Balanced” a lot. This sounds good. It is a basic term meaning all things equal.

If the goal is to have all Americans be equal financially, i.e. make achievers poorer, and redistribute that income to those on the lower income scale, that is not what America is about. That is not what drives invention. That is not what made America a free and prosperous country. If government is going to penalize those for being successful and reward (redistribute) to those who contribute the least, is that fair or balanced?

Obama’s “balanced” approach means higher taxes on the so called wealthy. The term “wealthy” originally meant, “millionaires, billionaires and corporate jet owners” (Source: Washington Post, and The White House, PDF).

What we have found since then, “wealthy” now means those making over “$250,000 per year.” This is a stark contrast from “millionaires, billionaires and corporate jet owners” wouldn’t you say?

Is $75,000, the New Wealthy?
Obama’s revised “wealthy” definition also assumes that you are married and making $250,000 or more BEFORE taxes. If the Bush tax cuts expire, a single person with student loans making just $75,000 a year would lose their ability to deduct the interest expense from those student loans. This means a single person with $75,000 income will see their taxes go up. Is $75,000 the new “wealthy?”

This is just one aspect that affects people who are not even close to being wealthy. Thus, Obama’s ‘tax on the wealthy’ does not just affect the newly revised definition of “wealthy,” it affects the middle class too.

If one considers divorced Americans, should we not talk about this half too? Where is the balanced approach for single people, and single parents?

Balanced Approach II: Lower Government Spending? Stop My Sides Hurt!
The other side of Obama’s “balanced” approach is to ‘lower government spending.’ This is almost like spending an evening at the Improv. Regardless of the semantics, the reality is that this Administration has done nothing to make a material impact to lower government spending at all. The facts are that this Administration has INCREASED the deficit now by $6 Trillion in just 4 years – more than the Bush Administration created in 8 years.

The bottom line here is that, there no evidence to show the Obama Administration is willing to make any material cuts in government spending. If we take a look at Obama’s 2013 spending plan, it creates a new deficit of $1.22 Trillion – that’s on top of the $6 Trillion of debt already racked up.

Next, let’s take a look at Obama’s term, “responsible”
The President said we need to address the Fiscal Cliff in a “responsible” way.

Is it “responsible” for highly paid leaders, funded by taxpayers mean that we wait a year to address a problem such as the Fiscal Cliff?

This is a lot like trying to plan all your investments, and your life over the next year in a matter of hours. It also assumes that nothing in the plan can go wrong.

Regardless of a Last Minute “Deal,” Won’t Solve U.S. Economic Problems
The Administration could have already dealt with these issues, but instead decided over a year ago to put if off until AFTER the 2012 election.

The Administration’s plan has not worked. The results are deficit spending, massive regulations stifling economic growth, refusal to make meaningful reforms in government and government programs and together have put the U.S. economy on a Titanic voyage.

The Reuters graphic at the top of this page shows that the U.S. economy has been slowing for months. I would argue that businesses are concerned about what new taxes, new regulations, or other policies will be handed down that will impact business negatively, so they don’t hire, or don’t invest as they might otherwise do as the data shows.

U.S. Deficit to Rise in 2013 – AGAIN
One of the issues that are off the table in the Fiscal Cliff debate is controlling government spending. This issue will be addressed as the next Obama crisis in the first quarter of 2013. The Washington Post reported that the government has once again ran out of money, and ran out of its legal ability to go into more debt without new congressional approval.

“The Treasury Department has said that it will reach its $16.4 trillion borrowing limit by the end of this year. In theory, the government can stave off hitting the ceiling until February or so by juggling around payments and taking “extraordinary measures.” But, eventually, the government would no longer be able to borrow enough money to pay its bills. Crisis would set in.”

— Source:  Washington Post, 11-09-2012

As much as I would like to be optimistic that government would include meaningful spending cuts now, this is a stretch.

If we go by what the past 4 years has shown, is it going to be different this time? Is Obama going to be a “deficit cutter?” Will Obama offer a balanced budget amendment that says the government can’t spend more money that it takes in? If we can’t do this, that means the deficit will continually grow and grow and grow until … you did see what happened to the Titanic right?

Happy New Year!

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Graphic Credit: Reuters, 12-13-2012

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