The grave topic has blanketed news stations and news articles, CNN to WSJ. The “fiscal cliff” is straight ahead, but can be avoided by taking swift action, working towards a compromise, and a temporary end to the gridlock that plagues our elected officials in Washington.
This fiscal cliff is a decisive, and controversial matter—the process of circumventing the overwhelming budget crisis will remain at the forefront of American economics and politics because there are legitimate concerns that America is heading towards an economic disaster. If Congress is not able to agree upon a compromised solution to the impending crisis, no one will be left unaffected—including us, college students.
If inaction remains in Washington, the government will undergo a combined $607 billion in spending cuts and tax increases on December 31, 2012. The slashed spending will be split between domestic spending and the defense budget. The spending cuts were signed into law by President Barack Obama last year in the “Budget Control Act of 2011,” put in place to incentivize Republicans and Democrats to solve the budget crisis by reducing the massive budget deficit in a rational approach. The spending cuts, referred to as “budget sequestration,” are estimated to be $1.2 trillion over a ten-year period from planned spending, including more than $500 billion from the defense budget.
The impending budget crisis has been on the discussion table since August 2011, and it was brought forth again by House Speaker Boehner and newly re-elected President Obama after the elections on November 6. The election left Boehner, an Ohio Republican, with less leverage to negotiate because there is a greater Democratic majority in the Senate and a smaller Republican majority in the House. Boehner and Obama each stated that they are willing to compromise on the approach to avoid this imminent economic obstacle, yet reiterated their previous entrenched positions.
Controversial tax code legislation enacted by President George W. Bush in 2001 and 2003 are set to expire. Democrats and Republicans agree that we must not raise taxes on the American middle class, defined as families making under $250,000 per year. However, President Obama wants to increase taxes for wealthy Americans (those who pull in over $250,000 per year), while the Republicans want to maintain lower taxes for everyone, though they are willing to discard specific tax loopholes and deductions.
The American economy finally appears to be regaining strength and our nation cannot afford to remain in a stalemate if the approaching fiscal cliff is to be averted. If a dramatic compromise is not reached between the two deeply embedded sides, the American economy will be closer to dipping back into a recession. In the past, neither Republicans nor Democrats have been willing to concede political ground on the issue—this is the delicate predicament where our nation finds itself today. It is our obligation as affected citizens to demand our elected officials to display rational behavior to resolve the budget crisis while undertaking a sensible approach. We must avoid moving one inch closer to the brink, the edge of the fiscal cliff.