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The Impact of the Fiscal Cliff: Will it be avoided?

Updated on January 30, 2013

These economic times and the fiscal policy today and in the past have created a situation no elected official wants to take place. Avoiding the fiscal cliff as many in the media has reported is an event that will impact not only our country but countries around the world. We as a country must get our fiscal house in order. At the present time there appears to be a wide disagreement between what should be done between the political parties, it is time for both of them to come together to solve our fiscal dilemma. This is not meant to imply a criticism of one party or another as I believe there are good individuals with good intentions on both sides of the isle.

Our government has been spending more than it has been taking in for a number of years and both political parties are to blame. The culture in Washington needs to change and it will take some stepping up to the plate to address the critical issues involved which has caused and is causing our current fiscal crises. Many individuals I feel do not realize the impact if our country goes over the so called fiscal cliff. What really will be the impact and how can it be avoided is a question not easily answered.

First the deficit spending is out of control and has been for several years. The problem in real terms is the fact that the programs and laws in place costs money to operate, manage and enforce. The amount of money coming to the Treasury from tax revenue is not enough to cover the costs of these programs some of which are new and some have been around for years. One of the questions to be answered and probably never will be is whether these programs fall in line with the constitutional responsibilities of the federal government. Granted there are some critical programs and functions which may not necessarily be specifically identified as a federal government responsibility but they are the right place to manage. Some of these programs are typically referred to as entitlement programs. At the current rate the funds for these entitlement programs are going out will exceed the funds being received. This is a fact presented by many sources and investigations. When this will occur at this time is anyone’s guess as the timeframe is different dependent upon who is presenting the facts.

Understanding the impact and how it will affect us as individuals is difficult to put it in perspective as each of us will be impacted differently but the economy of our country will definitively take a turn for the worst if it occurs. All elected officials in Washington must address the needs of the country not their political philosophy. We have elected those to represent us to make good decisions for our country not their political party. What some may not understand is the fact if good decisions are made for our country it is good for their political party if they have been a part of or support these decisions. What must or should occur is each political party must balance their principles against the needs of the country. While this may be a difficult task to accomplish it is what is needed to put our fiscal house in order.

Getting into some specifics real spending needs to be cut and where the cuts will be made needs to be identified in any agreement to avoid the fiscal cliff. In arriving at this juncture the cuts made should consider what is necessary in relation to what is a nice thing to have. While this may raise some concerns as each politician will have different opinions on what is a necessity and what is a nice thing to have criteria needs to be established. It is important that the criteria developed be bi-partisan as to the criteria to measure the necessity of each program and also the necessity of the regulations associated with each program.

Another aspect involved in the projected fiscal cliff is the somewhat stagnant employment situation. What needs to occur is there needs to be a real effort to create an environment where employers feel it is in their best interest to hire and expand their business. The economic downturn of our economy and the world is causing less revenue for government operations. Making decisions today regarding increasing revenue to fund government operations should involve an examination of our history to determine what has worked and what has failed with respect to creating a growing economy. Granted there are certain aspects of our economy that has seen a rise of employment but the rise has not offset the negative of millions of individuals out of work.

The logical approach is to create an environment where businesses will know their expenses from year to year and can make plans associated with their business. Businesses will not expand in an uncertain environment where they do not know what their expenses will be from year to year. This needs to change. Each year laws and regulations are generated which cause heartaches for our business environment. The more people are working the more tax revenue will be received by the government to fund necessary programs. In these times it is a certain fact that tax increases will be a part of any agreement to address our fiscal cliff but the right tax decisions need to be made. Tax policy to some extent in general terms needs to be revamped while some specifics need to be identified as to what loopholes will be eliminated so the impact of the changes can be measured by GAO.

It is important that in any agreement to avoid the fiscal cliff that the right decisions will be made to ensure it will be avoided. In addition additional specifics regarding our tax structure needs to be identified so it is fair to all taxpayers. One option to consider is the fair tax system. The key is to revamp a tax structure that is cumbersome for individuals and businesses to totally understand without needing a lawyer. Granted some taxpayers do not need a lawyer but a taxpayer should not need a lawyer to file a tax return. The length of the tax regulations changes from year to year, it needs to be simplified and written in language any individual can understand. Granted our tax system is not directly affecting our fiscal cliff but it can have a positive effect by providing more incentives for individuals and businesses to expand and/or hire additional individuals. Our economy needs workers which will provide more revenue for the government. The extra income will help our deficit but spending should not be increased with any additional revenue a revamped tax system would provide.


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    • Dennis AuBuchon profile image

      Dennis AuBuchon 4 years ago


      Thanks for providing additional input

    • ib radmasters profile image

      ib radmasters 4 years ago from Southern California


      I disagree.

      Brilliant people like Thomas Edison were not in the government.

      Where are the brilliant people in government that brought the country down to its knees in this century?

      Where is the pursuit of happiness when 47 million people are on food stamps and 23 million are out of work. And the tens of millions of people lost their homes while the government gave stimulus money to the banks and financial institutions that caused the problem.

      Where is the liberty when the government is watching everyone, and listening into their conversations and emails. This was going on before 911.

      Today we see the culmination of a big bad incompetent or corrupt federal government.

      On Sandy maybe you should talk to the people that have been let down by FEMA.

    • Dennis AuBuchon profile image

      Dennis AuBuchon 4 years ago


      Thanks for your comments. I appreciate all input whether individuals agree or disagree and/or provide more input the the issue at hand.

    • zenpropix profile image

      zenpropix 4 years ago

      To answer ib radmasters question -- I was simply paying appropriate homage to great statesmen, whether they be liberal or conservative. And yes, great statesmen have advanced 'life, liberty, and the pursuit of happiness.' At the time those words were written they pretty much applied only to male property owners ages 18 and above. Women, slaves, and kids were little more than the property of those men.

      And yes, brilliant people do bring about quantum leaps forward that make the hard work of Americans more fruitful. Without Thomas Edison, hard-working Americans would have been making kerosene lamps instead of light bulbs for another couple of decades in the late nineteenth century.

      Finally, the role of a powerful federal government in an increasingly complex and inter-dependent world is vital in areas like securities regulation and disaster relief. You may want to talk to Gov. Christie about the federal government's role in major natural disasters like Hurricane Sandy.

      Nonetheless, I appreciate the passion that you bring to the debate. You are offering more than so many who don't develop views or engage in any political discourse whatsoever.

    • Dennis AuBuchon profile image

      Dennis AuBuchon 4 years ago

      Thanks for all the comments, I appreciate each one of them and they give us some points to think about. Thanks for adding points which make this hub better.

    • ib radmasters profile image

      ib radmasters 4 years ago from Southern California


      Do you really think that the US got to where it is Today, by brilliant people, and great statesmen?

      Good intentions pave the way to Hell. But Good work gets the job done, and the job in the US is not done, not even close.

      Life, Liberty and the Pursuit of Happiness were the original goals of this country, but the government is usurping these goals by making the government too powerful and increasing their scope.

      The majority of the power of the federal government was taken from the states over the period of the last one hundred years. Pretty soon there will be no states, only the federal government.

    • zenpropix profile image

      zenpropix 4 years ago

      I tend to resist the use of categories that divide our citizens up in ways that often obfuscate the issues. Certain categorizations are essentially simplistic media creations. I'd challenge anyone to figure out for themselves how Americans are to be 'grouped.' I'd argue that the needless bifurcation of the country into just two groups -- rich and poor -- is in fact impeding progress in the 'fiscal cliff' debate.

      I applaud Dennis AuBuchon for stating that there are 'good people with good intentions on both sides . . . ' Great statesmen, both liberal and conservative, have advanced this nation's great ideals. The ongoing clash between conserving 'what is' and pursuing 'what ought to be' both is inevitable, and constructive. Life, political and otherwise, demands that we endlessly define what is worth retaining vs. what ought to give way to something new.

    • Ericdierker profile image

      Eric Dierker 4 years ago from Spring Valley, CA. U.S.A.

      Somewhere the bottom line has to be, are those making money willing to help those that are not making any or enough. Politicians cannot really decide that, we have to and we are still not in accord.

    • ib radmasters profile image

      ib radmasters 4 years ago from Southern California


      While your hub reflects the truth, it isn't going to solve the problem.

      First, Entitlements are not handouts, the SS, Medicare are TAXES that also provide a benefit to those wage earners that are Forced to contribute into the system. These people didn't cause the impending insolvency of these programs, it was both parties of the Congress that didn't treat them correctly.

      So it should be congress and not the contributors to these funds that should feel the pain. Before any of these entitlements should be reduced or eliminated, the government workers should have their benefits and pensions reduced or eliminated. Too late for Medicare as President Obama has already stolen $716 billion from it to pay for his entitlement of ObamaCare.

      The Income Tax System is the core of the economic problems of this country. It should be abolished and replaced by a National Sales Tax, and I don't mean a flat tax. The Income Tax laws change every year and that doesn't make any business sense.

      Again, as you have state both parties are responsible for the economic problems we have today, but ultimately it was caused by the voters in not forcing their candidates to do a better job, or at least a competent job. For the next two years, the die is cast and there is no hope for any positive change. Maybe in two years the voters might put the pressure on the incumbents to accomplish something or not get reelected. This is not limited to a single party, it is applicable to both parties.