Fiscal Cliff-How did we get here?
As we get closer and closer to the edge and it becomes increasingly
apparent that the USA will take the plunge, I asked myself the question
how did we get here in the first place. Well the short answer is that we
spent our way into this mess. However, nothing in the world is ever
that easy to resolve. The Republicans want to say do not raise taxes
just cut spending. The Democrats say no give us more taxes and then cut
spending. Republicans less government involvement, Democrats this
country needs government involvement. Politics as usual and nothing is
done. Mind you, no one wants to own up to their respective parts in the
mess. It took both parties participation in brokering the deal that will
take effect January 1, 2013, if nothing is done to undo it. This
“compromise legislation” is what got us facing the fiscal cliff. Yet the
President and Congress are considering proposing compromise legislation
that will only put a bandage on the bigger problem. Individuals,
lobbyists, corporations, political ideologies are shaping this country’s
future and in my humble opinion in the wrong direction.While compromise was written into the United States Constitution in the form and fashion of the three-fifths (3/5) compromise which relegated people of color to less than a person in order to get the southern states to ratify the Constitution, some compromises are not good compromises even if they achieve an immediate goal or objective. I hope no one would argue that slavery or relegating a person to a second-class citizen and the property of another was a good thing. If you do, just do a little research of this country’s history, the causes of the Civil War for starters.
There is a move in this country that is polluting the very fiber and principles upon which this great nation was founded. The words “We the People” are now being translated in Me, Myself and I; i.e. what is in it for me. Our forefathers must be turning over in their graves to see what they created through their blood, sweat and yes tears be relegated to our present belief of anything goes so long as it gets me what I want. I got my, you get yours the best way you can even if you are down on your luck (homeless, food stamps, Medicaid, you name it). Have we grown into a heathen nation of greedy do-nothings? Yes that’s right do-nothings, in the sense that they choose to sit on their wealth and not re-invest it in a nation or its people. At one point during the deep recession, it was estimated that Americans were sitting on some $2 trillion. Now if this is what the rich is going to do with lower taxes, let them be required to pay more to the government and lower its deficit. The Republican Party argument that keeping taxes lower on the 98% will stimulate the economy and produce jobs just does not hold water with reality. For them to say leave the 98% alone and cut Veteran benefits, Social Security Benefits, Medicare, Medicaid is simply ludicrous. None of these entitlement programs significantly adds to the deficit, if they do at all. The recipients of these benefits have actually earned them, either through their service to our country, or taxes paid at some point throughout their lives and/or monthly insurance premiums. However, the tax rates and deductions the Republicans demand for the 98% actually do contribute to the deficit. Some estimates are as high as $1.3 trillion dollars. These tax cuts, two unfunded wars and Medicare Part D, the unfunded drug plan pushed through Congress by the Republicans during the Bush Administration, is the reasons for the deficit. How dare the Republicans now say America must cut, cut and more cuts to spending and balance the budget when they spent, spent and cut taxes for the rich creating the deficit? I guess it is do as I say and not do as I do that is working here.
When I was back in college studying to get my degree in accounting, I learned that in presenting a balance sheet there is a simple formula used, Assets= Liabilities+ Equity. A key component of the equity portion of the equation is retained earnings. The simplest forms of retained earnings consist of the accumulation of profit and losses from the business inception. Therefore, if a business has been strictly profitable throughout the years, its retained earnings and consequently, the owner’s equity should be substantial and the liability section of the balance sheet should be significantly lower to make the equation work. Just to keep it simple here, we will say profit equal excess revenues over expenses. If all you do is cut your expenses without raising revenue, eventually your balance sheet will shrink because your assets will not increase because there is not any additional cash coming in to buy other assets. Yes, your liabilities will likewise shrink because outflow will be reduced correspondingly to the cuts, but the effect is no growth only maintaining stability. Consequently, a healthy business or country must not only control spending but it must also increase revenue in order to grow. There is no way a business can continue to survive simply by cutting spending and not increasing its revenues. The math just will not work.
History tells us that when George W. Bush took office, Bill Clinton left him a $1 trillion-dollar surplus and within eight years, not only had George W. Bush wiped out the surplus, but he also left President Obama with a $13+ trillion-dollar deficit. The reason for this is simple. During the Clinton years, revenues were up and spending was not in excess of revenues. During the Bush years, revenues were down, primarily due to tax cuts for the rich, and spending was off the charts, primarily because of two unfunded wars. The math the Republicans used during the Bush years did not work then and just will not work now. Oh I am sorry, I forgot, the math is different for a Democratic President. Mr. Obama has to balance the budget and reduce the deficit all without a dime increase in revenue. Next, I guess they will ask him to walk on water.
Now that the USA is facing a fiscal cliff nightmare, we have another problem that coincidentally will occur the same day, the USA debt ceiling would have been reached. It seems that we have been here before. Wasn’t it the negotiations over the debt ceiling that got us the fiscal cliff compromise in the first place and I suspect it will produce an equally bad law this time if the President and Democrats cave to Republicans demands once again to not to tax the rich in return for the raising the debt ceiling. Mr. President I hope you do not allow the Republicans to back you into the corner again because of this impending Debt Ceiling limitation. How dare the Republicans in Congress hold this country hostage by not performing their Constitutional duties they swore to perform, one of which is to insure that the full faith and credit of the United States of America is never called into question? In any event, one scholar has suggested there are three ways Obama could bypass Congress on the debt ceiling issue. Mr. President what have you got to lose if the Congress will not do their job, you do it for them?
Will it be Déjà Vu or will we see a different outcome this time? If it means enacting another bad compromise or falling off the fiscal cliff, I would choose let us fall. At least we all will suffer not just the poor and powerless.
Now that is my two cents worth, Leonard
