Perfect storm, fiscal cliff, economic time-bomb. Can things get any worse, yes. Our leaders will drive us off the cliff, let the tidal wave crash across the bow, allow the bomb to tick down to zero and ultimately allow it to ignite. Pushing us into a recession in early 2013.
The events that make up the fiscal cliff are:
If the tax increases and spending cuts do take effect, we could save up to $600 billion starting in 2013. The risk is another recession. Democrats would say that government spending helps to stimulate the economy. If there is no money in the coffers, that could be a challenge.
Republicans would choose to limit the growth in the deficit by limiting expansion of government spending and entitlement programs (Social Security, Medicare, and Medicaid, most Veterans' Administration programs, federal employee and military retirement plans, unemployment compensation, food stamps, and agricultural price support programs). Defense spending would not be cut and the Bush tax cuts would be extended for all Americans.
Any knee jerk fiscal tightening could send an already fragile economy into a recessionary nose dive. What is needed is an agreement on broad-based tax reform and moderation in spending cuts. What is certain is that nothing will get done until after the election. We'll be kept in economic suspense, slow growth and business paralysis for at least the first half of 2013. Doing nothing for productivity growth, job creation and deficit reform.
Short of putting both parties in a cadillac and sending them over the cliff, what can we do? Nothing. Sua Sponte.
Bradford C. Bruner for Sua Sponte Wealth Management.
The events that make up the fiscal cliff are:
- expiration of the Bush era tax cuts, the payroll tax cut and other tax relief provisions.
- first installment of the $1.2 trillion cuts in domestic and defense programs required by law.
- raising of the debt ceiling.
If the tax increases and spending cuts do take effect, we could save up to $600 billion starting in 2013. The risk is another recession. Democrats would say that government spending helps to stimulate the economy. If there is no money in the coffers, that could be a challenge.
Republicans would choose to limit the growth in the deficit by limiting expansion of government spending and entitlement programs (Social Security, Medicare, and Medicaid, most Veterans' Administration programs, federal employee and military retirement plans, unemployment compensation, food stamps, and agricultural price support programs). Defense spending would not be cut and the Bush tax cuts would be extended for all Americans.
Any knee jerk fiscal tightening could send an already fragile economy into a recessionary nose dive. What is needed is an agreement on broad-based tax reform and moderation in spending cuts. What is certain is that nothing will get done until after the election. We'll be kept in economic suspense, slow growth and business paralysis for at least the first half of 2013. Doing nothing for productivity growth, job creation and deficit reform.
Short of putting both parties in a cadillac and sending them over the cliff, what can we do? Nothing. Sua Sponte.
Bradford C. Bruner for Sua Sponte Wealth Management.
