Deviant Login Shop
 Join deviantART for FREE Take the Tour

Details

Closed to new replies
December 30, 2012
Link

Statistics

Replies: 39

Fiscal Cliff?

:iconcherryblossomgeisha:
CherryBlossomGeisha Featured By Owner Dec 30, 2012  Student Traditional Artist
I'm not really understanding what the whole concept of the fiscal cliff is. Can someone clarify?
Reply

You can no longer comment on this thread as it was closed due to no activity for a month.

Devious Comments

:iconhjsman:
hjsman Featured By Owner Jan 1, 2013
You have received quite a few poor responses on the fiscal cliff on this thread. The lack of understanding amongst the various members of DA is utterly shocking but in a way does not surprise me at all. Sorry, that is my little rant about the responses you have been receiving.

I will now answer your question.

The "fiscal cliff" is the term used to describe the US governments maximum debt that it is legally allowed to accumulate. Think of it like a credit card limit. The goverment spends a lot more than it receives in income, therefore it must borrow. However once it's "credit limit" or "fiscal cliff" is reached, it must stop spending or legislate to increase the debt ceiling or "credit limit". Without that legislation further borrowing would be unconstitutional. Current US debt is currently over 16 trillion dollars. In order to spend more a consensus in congress must be reached.

I hope that helps....

....and I am truly sorry that you must endure all the conspiracy theories and other tripe which so often appears in these forums.
Reply
:iconmgonzales041090:
mgonzales041090 Featured By Owner Jan 3, 2013  Student Traditional Artist
That's not what the fiscal cliff is. That's what the debt ceiling is. The fiscal cliff is a series of tax hikes and spending cuts which were likely to plunge the US into another economic recession. The term was coined by Ben Bernanke, Chair of the Fed.
Reply
:iconhjsman:
hjsman Featured By Owner Jan 3, 2013
You are correct. The fiscal cliff refers most directly to the instance of simultaneous tax hikes and spending cuts which were to occur on January first. I should have been more clear. The primary battle however is its relationship to our ever growing sovereign debt. Which now sits around 16 trillion plus and how to best resolve the problem. There are some who want this debt to reduce. There are those who want the economy to grow through the expansion of this debt. The question is how long can we continue to do that.

Think of it this way...

Imagine you are someone who has ...

Income of $23,000 per year

Spends $38,000 per year

And

Has a credit card with a balance of about $160,000 in total

Add a bunch of zeros to those figures and you basically have the United States fiscal situation. It is a cliff because the law only allows for so much debt accumulation. They may have agreement right now. But they still haven't agreed on the debt ceiling.

Looking at it this way it may not have been so bad to go over the cliff. (Except for the tax hikes, but that is just my philosophy) but we would have seen a very rapid decline in the budget deficit. And I am aware it would impact the economy and various social programs before I get called out on that. But it is already making its impact and as the problem swells it could implode one day. Some may think that impossible but time and history march ever forward and it still has a long way to go.

Now you can keep growing this debt as long as your income grows as fast or faster than it. However lately the debt has been growing much more rapidly.
Reply
:iconmgonzales041090:
mgonzales041090 Featured By Owner Jan 3, 2013  Student Traditional Artist
I know how the debt ceiling works. As for the cliff, it actually would have been better to go over and allow both the spending cuts and tax hikes. That being said, the crux of the fiscal cliff had to deal with the damaging tax hikes added to the end of employment insurance which decreased the overall spending power in the economy and lowered the GDP by .5%, according to the CBO. The likelihood was to be another recession. Spending cuts only got put on the table by Republicans who wanted to play with spending as a bargaining-ship for extending taxes for everybody. The President's goal was to extend the Bush tax cuts to 98% of Americans, while the GOP wanted them extended for everybody and, instead, wanted spending cuts to offset that revenue. The debt limit was just part of what the negotiations MIGHT have included. Instead, the debt ceiling argument is being saved for another day.


Here's another thread I wrote up on it which examined the numbers and the benefits of going over. You can read about it here. [link]
Reply
:iconcherryblossomgeisha:
CherryBlossomGeisha Featured By Owner Jan 3, 2013  Student Traditional Artist
wow, thank you so much. I was able to understand that a lot. ^_^
Reply
:iconmgonzales041090:
mgonzales041090 Featured By Owner Jan 3, 2013  Student Traditional Artist
His answer was incorrect btw.
Reply
:iconcherryblossomgeisha:
CherryBlossomGeisha Featured By Owner Jan 3, 2013  Student Traditional Artist
how?
Reply
:iconmgonzales041090:
mgonzales041090 Featured By Owner Jan 3, 2013  Student Traditional Artist
Mci021 has the most accurate answer. It's automatic spending cuts and tax hikes.
Reply
:iconmiletich2:
miletich2 Featured By Owner Dec 31, 2012  Hobbyist Writer
The fiscal cliff is an illusion. It's all a ploy by the GOP to encourage recall campaigns against President Obama.
Reply
:iconragerancher:
Ragerancher Featured By Owner Dec 31, 2012
In the US system Congress is the only body with the power to enact a budget. The executive (president and co) act within that budget. There is something called the "debt ceiling", this is the maximum the executive can borrow to finance the budgets. When it hits that ceiling, it isn't allow to borrow any more. This means in order to keep government running they need to be able to provide all the funds for spending without any borrowing. The US government passed a bill some time back saying what would be done to balance the budget if the ceiling was reached without any deal being made. That is the fiscal cliff, it is forcing the government to balance to books so it can fund itself. As the US government currently runs by borrowing lots of money, this means it needs to cut spending and raise more revenues to have a balanced budget.

It's essentially a slash and burn solution.
Reply
Add a Comment: