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Cliff Diving - By Daniel Riordan

November 23, 2012

Maybe President Obama is now wishing he didn’t win re-election.
It may be easier to get to January as a lame duck rather than an incumbent.
After the fog of turkey and stuffing dissipates, there are still two huge looming issues for this country and the world: The Fiscal Cliff and Israel.
The situation in Israel is too complex for me to tackle in one, or maybe several, columns
So let’s just look at...The Fiscal Cliff.
For those uninitiated, this is a series of measures set to take place at the end of the year. They include the end of a 2-percent payroll tax cut.
What that means for you and me is less in our paycheck.
And that’s not all.
Many tax cuts for businesses and individuals would go away. This coincides with new taxes, like the medical device tax, that are set to hit the books to help pay for Obamacare.
Many programs would be cut if a compromise isn’t reached on this.
These cuts, otherwise known as sequestrations, along with a spike in taxes could land us back in a deeper recession than we are now.
That’s not just my opinion. That’s the belief of the Congressional Budget Office.
This is not a new problem. This didn’t just pop up at the end of the campaign.
This has been going on for three years.
Because Congress is fundamentally broken, this was considered to be a compromise during the debt ceiling debates back in 2011.
In the NBA, contracts are written up with “Poison Pill” provisions.
Basically this is giving a player a baseline contract for two or three years that is reasonable. Then the final year, the salary doubles or triples. This is designed to keep other teams from offering a deal to match.
This set of sequestrations was intended to insist that adults come to the table and avoid 2013 being a blood bath.
Maybe the Mayans have something in store for us to avoid this.
The answer is simple. You don’t have to be an economist to figure out what the issue is.
We are running up massive debt. Why? Because after the financial collapse of 2008, we needed to prop up our citizens as much as possible for fear of entering a great depression and perhaps the end of our republic.
But the economy is now slightly better.
So we need to start backing off all the subsidies we give out.
It’s simple. To decrease debt, we have to make sure the money we take in is more than the money we spend.
The money we take in is from tax revenue. While I agree the rich could stand to pay what they did when Clinton was president, that doesn’t fix the problem.
It’s a drop in the bucket.
On top of that we must cut spending.
What are our big ticket items? Medicare, Medicaid, Social Security, Defense Spending.
You want to cut any of those?
If you’re a politician, it’s basically career suicide.
Obamacare is supposed to be a cost-neutral, if not cost-saving measure. I’ll hold off judgement on that.
The problem I see when you enact any large federal program, is the unintended consequences.
Ok…let’s say Obamacare saves the government in cost. But what else may it do? Well, if you listen to the Orthopedic honchos in Warsaw, they’re going to lay people off to help pay for the tax that comes from Obamacare.
That puts more people on unemployment. Thus adding a cost to the government.
Paul Krugman, I don’t pretend to be, but often I find these sorts of moves are robbing Peter to pay Paul.
Look at defense spending. Let’s say we decide to cut costs buy ramping down defense production. Well that means a slow down of private sector companies. Which inevitably means a loss in jobs.
Same thing with the IRS and tax codes. A lot of people say create a fair tax. Thus you eliminate the IRS and create a savings. Think of how many people would be unemployed if you eliminate the IRS and all the H and R Blocks of the world.
You have to raise tax revenue, you have to lower spending. Those are obvious.
But this country also needs a new industrial revolution.
Whether that’s through “green” jobs or nanotechnology, we desperately need to increase the manufacturing base in this country.
We also need to be more serious about how we educate our children. And be realistic with them and those currently in the workforce about what is needed.
There are by some estimates 3.7 million jobs open in America. Why aren’t they filled? There aren’t enough qualified people to fill them.
That’s because we graduate as many theater majors as we do chemical engineers.
Now I’m not against the arts by any means.
But often it doesn’t pay the bills.
The things I’m talking about I feel are dramatic paradigm shifts in how we think as a country.
The days of going to high school, getting a good-paying job at the local factory, and living a middle-class existence is over.
The old model doesn’t work. We need a new one.
Increase revenue through taxes and increase tax base. Decrease spending through auditing and making tough choices.
That’s the only way to fix our deficit issue.
This may mean some tough times for many of us in the short-term to help us prosper in the long-term.
I, for one, am for that. I’ve never been rich. I live pay check to pay check. I know many of you do.
If I was confident things could get better by living the way I do now for just a bit longer, I’d sign up for it.
And I think most reasonable people would say the same.
But our elected officials listen to the loud minority.
And for fear of losing an election, no matter what is decided upon before Dec. 31, it won’t really create a solution.
It’s just going to create a similar situation, a similar crisis a couple years down the road.
Unless, like I said earlier, the Mayans knew something we don’t.

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