Two giants, locked in a deadly embrace, biting, clawing, fighting. Both covered in dried blood and dirt– both holding onto a torn scrap of red, white and blue fabric. The landscape behind them is a no-mans-land, ravaged by their decades-long battle. The giants begin to near the looming edge of a cliff, but neither will relinquish the scrap of cloth. Neither is willing to give up what they claim as their own. But this is no Tolkien-esque battle for Middle Earth– this is the US budgetary crisis, and the edge of the cliff is growing closer each day.
Should Democrats and Republicans fail to reach a compromise on the federal budget by the end of 2012, a series of tax increases and spending cuts will automatically take effect at the start of the new year. The term “fiscal cliff” is used to describe the sharp reduction in the US budget deficit– the difference between government revenue and expenditures for a single year– that will result from these measures.
This plan was originally created as a motivation for bipartisanship; a sort of fail-safe to force Democrats and Republicans to compromise on a new budget plan. As of yet, neither side has been willing to compromise in the federal budget debate.
When 2012 comes to end, the Bush Era tax cuts will expire– causing taxes to go up on Americans across the economic spectrum. Also taking effect at the beginning of 2013 is the Budget Control Act of 2011. This will result in budget sequestration, or across-the-board cuts to the majority of government programs.
The problem with this plan is that it’s focused on reducing the deficit– when the real problem is the stagnant state of the US economy. Politicians throw out phrases like $1 trillion deficit, and people become frightened. But what history has shown, and many economists have advised, is that governments faced with depressed economies can’t focus on reducing the deficit until they can successfully bolster the economy.
The true crisis– termed by writers of The Washington Post– is one of austerity. Imposing measures such as these– both numerous and severe in their austerity– will ultimately hurt the economy more than it helps it. Though the timeline and nature are points of contention– it is generally agreed upon that the tax hikes and spending cuts will throw the US into a recession in 2013. It is true that having a budget deficit as large the federal govenment’s is unhealthy for a nation, but we cannot worry about reducing it until our economy is in a stable state.
What can we do to prevent this crushing dose of austerity? The answer– nothing. All indications lead us to believe that the two parties will not come to an agreement before the start of the new year. Yes, the fall will hurt, but it may take an injury to teach us that stimulus, rather than austerity is the answer. So maybe it’s best that we just take the leap and pray that we survive the fall.