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December 21, 2012
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It's actually good to go over the cliff

:iconmgonzales041090:
mgonzales041090 Featured By Owner Dec 21, 2012  Student Traditional Artist
Thus, we should all hold hands and nose dive over. Recently, in the hysteria of checking one party's plan over the next (more specifically, the Plan B catastrophe of Boehner), I decided that I'd go over the potential scenarios of us going over the cliff, and the effect it has on the American people. Now, as Ben Bernanke warns, it could lead the US into a double dip recession. However, the long term effects could very well pull the US out of a budgetary crisis.


This is a graphic drawn up by the Congressional Budget Office. [link]

It paints a relatively grim picture by way of GDP growth, and unemployment which kicks as high as 9%. That point being made, by 2017, the federal debt begins to substantially lower to as much as 58% of our GDP. Our deficit, should we go over, is projected by the CBO to reduce our deficits by as much as $560 billion from 2012-2013 year.

[link]

The recession, as predicted by the CBO for going over, would last 'til mid-summer, at which point the GDP would bounce back and begin a growth at a rate of .5% (sluggish, but a growth). Expenses from this go mostly towards unemployment insurance, and social safety nets. Unemployment is projected by the same CBO to rise up to 9%, before bouncing back. Experts such as economist Bruce Bartlett agree that going over the cliff is economically viable, and a meaningful method of avoiding a long-term catastrophe. That is, the ability to pay down our public debt, and reduce our deficits. The amount of debt held by the public has increased from $4.9 trillion in the beginning of 2007 to $11.5 trillion today—from 36 percent of GDP to 75 percent of GDP.

The Office of Management and Budget released a nifty table showing how it's possible to return to Clinton-era spending as well as taxes, and avert the growing interests on our public debt. This is what reductions can reasonably take place -

:bulletred: Defense spending reduced by 3-5% (3% is Clinton-Era. You can push 5% to compensate for Medicare loss).
:bulletred: Medicare spending reduced by 2%


Both of these returning to Clinton-era levels of spending should yield roughly $200 billion in savings over a 10 year period. Now, for taxes (copy/pasta from Washington Post).

- Taxes

Five tax measures have provisions expiring at year’s end:

- 2001/2003 Bush tax cuts: These cut individual income tax rates, pared back the estate tax, lowered rates for investment income (such a capital gains and dividends) and expanded a number of tax credits, including the child tax credit. According to the Economic Policy Institute, these would cost $203 billion next year if extended.

- 2009 stimulus: This included expansions of the Earned Income Tax Credit, which provides aid to low-income workers, as well as the child credit, and the American Opportunity tax credit, which helps families pay for college tuition. Extending these would cost $10 billion next year.

- Payroll tax holiday: This was included in the December 2010 tax deal and slashed the payroll tax rate on employees from 6.2 percent to 4.2 percent. Extending it would cost $115 billion next year.

- Alternative Minimum Tax: Intended as a baseline tax for high earners, the AMT is not indexed for inflation and would hit a lot of middle-class taxpayers if not “patched” before next year. A patch would cost $114 billion.

- Extenders: This is the catch-all term tax wonks use for corporate tax breaks that need to be extended regularly. Doing that again, as per usual, would cost $109 billion.

$109 + $115 + $114 + $10 + $203 = $551 billion in lost revenue should taxes expire. So, we take this $551 billion in lost revenue, and assume that the law kicks in, and taxes revert back to Clinton levels without any White House change.

:bulletgreen: $551 billion in one year
:bulletgreen: $900 billion from richest 1-2% in decade.

Another substantial deficit and debt reduction plan. As far as entitlements go, they are self-funded and have virtually no effect on the budget. More-over, it's unfunded parts of the budget. We could take a page from Ronald Reagan and raise taxes on Social Security to better fund them to maintain the rate of growth. Potential fix, though, admittedly, it's probably going to require a rise in the age of retirement from 65 to 67, in addition to a lift on the 110,000 tax cap.


tl;dr Point is, postponing the fiscal cliff only deepens it. The size of the drop off of the cliff will just rise as the interest grows on our public debt, and that the best way to go through it right now is to dive off the cliff and balance our budget while lowering our debt. We'll experience a recession, which we will probably work through and recover from. The DOW will plunge, which it will also recover from. Thoughts?
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:iconbroadwayext:
broadwayext Featured By Owner Jan 8, 2013
The country to the edge when they could have signed the one-sentence extension of debt ceiling in five minutes seem to at least know they are not gonna be able to spin themselves out of responsibility for this joke.

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:iconmgonzales041090:
mgonzales041090 Featured By Owner Jan 8, 2013  Student Traditional Artist
Going over the cliff would likely have only needed the debt ceiling to be raised once, and that's it. It reduces the debt long term.
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:iconvisionoftheworld:
VISIONOFTHEWORLD Featured By Owner Dec 28, 2012
Well all the fucked up conservatards that drove the country to the edge when they could have signed the one-sentence extension of debt ceiling in five minutes seem to at least know they're not gonna be able to spin themselves out of responsibility for this joke. There is no 'cliff' because it was already resolved a year ago when they passed these automatic cuts/taxes, and honestly I hope they get implemented. All the people who stand to take a tax hike are fundraisers for the tea bag cause and various other anti-American political movements. I have a good job so I'm not worried. I elected the right president to lead the country so that means even if I lose said job, I will still have access to healthcare. The blubbering ignorants can shove their fists in their asses and maybe they'll have a few more shooting sprees... fuck if I care. I didn't expect their insane ideology to go out without a big bang. I'm not worried about my taxes going up, it amounts to about $150 per year. I can get over it, and so can everyone else.
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:iconcarusmm:
carusmm Featured By Owner Dec 27, 2012  Hobbyist Writer
Hopefully America goes over the fiscal cliff and is never heard of again.
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:iconmomobfvfd:
momobfvfd Featured By Owner Dec 26, 2012
I am sticking with Ben Bernanke (the current head of the FED); I am hoping to Allah that lawmakers in this country are able to compromise before such tax hikes are implemented.
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:iconmgonzales041090:
mgonzales041090 Featured By Owner Dec 26, 2012  Student Traditional Artist
I know. I cited with Bernanke's claim about a 2nd recession. I just went by the testimonials of other economists whom agree that going over is the best thing for this country to do to control the interest on the debt in the long term (saving us from potential default).
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:iconmomobfvfd:
momobfvfd Featured By Owner Dec 27, 2012
considering what this would do to our already burdened economy (I.E. the increase in unemployment and people on government assistance) i have to disagree on the higher taxes fixing the debt. I honestly believe that the only reason politicians or other important people would say that this would be a good thing for America would be to try and quiet down the mega-rage when this does occur in January. Although debt is a major problem taxing a burdened populous would make the nation's economic situation much worse IMO. However, considering i do not have any degree in economics you might wanna take my opinion with a grain of salt
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:iconmgonzales041090:
mgonzales041090 Featured By Owner Dec 27, 2012  Student Traditional Artist
Taken with a grain of salt.
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:iconunvalanced:
Unvalanced Featured By Owner Dec 26, 2012  Hobbyist Writer
Spending needs to be slashed more than the fiscal cliff intends. But I'm actually okay with the cliff. *Shrug* I expect a recession either way.
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:iconmaddmatt:
maddmatt Featured By Owner Dec 25, 2012
I wish all ignorant liberals that vote for other ignorant liberals would do a little exercise. Sell lemonade for 10 cents per cup and track your sales for one year. Then, charge 1 million dollars Per cup the next year. Report which year had better revenues.

Liberals want to spend as if they will be selling the same amount of cups and need only raise the prices to offset their ignorant spending.

Bush had these rates, was funding two wars AND had the budget to only 150 billion deficit. A figure everyone in the country would accept at this point. If liberals were not such bloodthirsty vampires wanting the heads of the rich, then they would address their reckless spending and lack of ANY passable budget by this President before they went back to steal more from the people. You don't mention spending because the honest goal is to hurt those you consider privileged.

Ask France, Spain, and Greece how raising taxes to appease the middle class liberals works out for the country.
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