Four weeks to go before the fiscal cliff occurs. I believe that a last second deal will be made to avoid the cliff because both sides are scared of the consequences. Frankly I don't know why people are afraid of this so called cliff. I say bring it on. I think we will survive it and will gain some knowledge of how the economy really works.
The predictions are that if the tax increases and spending cuts occur as scheduled on Jan. 2, 2013, we will lose about 4% of GDP, putting us back into recession. I am no economist so I don't have any idea if these calculations are accurate. But this law was passed so that if the so called super committee can't find a way to reduce the deficit then the tax increases and spending cut to be implemented will reduce our deficit by 1.2 trillion dollars. Now throughout the last few years all I have heard is that we have to reduce the deficit as if not doing so will be the death of our economy. So now with less than a month we are saying that by reducing the deficit we are going to kill our economy? So I say let us go over the cliff. If we go into recession, then I guess reducing the deficit is not the cure all that we heard about in recent years. But if we don't go into recession then may be we will be more brave about cutting more of our deficit in the future.
The extreme right wants to reduce the deficit by cutting spending only. The extreme left wants to cut the deficit by raising taxes only. But most people think that both need to be done. This cliff forces us to do both just as most people want. I think initially the stock market will be spooked. There will also be less spending by consumers. But after a while maybe we will see that we don't need to spend more money on our military as the next ten nations combined. Maybe we see that a little cut on medicare do not lead to deaths to our seniors. Maybe our millionaires will see that losing a few thousand dollars a year in tax should not change their strategy in expanding their businesses. But if the recession lasts longer than I think it will, well, then maybe we won't be so vocal about drastically reducing the deficits next time.
Tuesday, December 04, 2012
2 comments:
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I really don't have much to add since I have no idea what will happen when the deadline occurs.
ReplyDeleteI am assuming that the backlash will be huge if nothing happens. We've seen the millionaires already move stocks and selling property. I can't tell if it's a panic move or just smart fiscal responsibility on their part.
The reason the cliff is so scary is because the media and politicians have used it and thrown it in our faces. I guess I don't have confidence in the politicians to do anything. You've gotta think that they can compromise but nobody wants to budge.
My one question is, will Congress go on vacation before the deadline or will they work through the holidays to get something done?
Why do I have a feeling that they will extend the cuts until spring? Is that even possible? I haven't heard of that being a possibility.
To me, the move to Obamacare has a larger effect. We are seeing companies effected by it, take measures so that the people at the top maintain their salaries, while punishing the people at the bottom.
-LBOAYM
I don't think there will be a deal before the very last few days of the year. If Obama and Boehner compromise now they both will get beat up by the extreme members of their parties. It will go down to the wire and then they can say they have to make the deal to save the country from disaster. So I still think the cliff will be avoided.
ReplyDeleteI don't think the majority of the wealthy people are making big changes on their investments in anticipation of the cliff. The few who say they are making changes may get in the news but they are not necessary the smartest. My accountant is a conservative Republican but his advice is don't ever make a decision base on taxes. I think that is right. If you make $300,000 a year, your tax will increase by less than $2,500 if Obama has his way. It makes no sense to base your decision on whether to expand your business base on $2,500.
If they don't make a deal and taxes go up and budgets are cut, well isn't it what both the extreme liberals and extreme conservatives want? We will find out what the consequences are. I think it will hurt for 1 year as confidence goes down. After that people will see what works and what don't work and realize it is not the end of the world and we will be all right again.