Fiscal Cliff Negotiations
Fiscal cliff is a term used by the Washington to refer to a series of tax increases and automatic cuts on spending that is set occur in January. In case, they take place, they would result to the biggest spurt of reduction in deficit in more than 40 years even though they could also take the country back to a recession. Cuts on spending include almost $100 billion of automatic cuts in the domestic government and the defense spending. There are other plans which include $400 billion of tax hikes that are primarily caused by the expiry on the temporary payroll cut on tax and other breaks of income tax that had been put in place during the administration of George W. Bush. Additionally, above 26 million households for the first will face alternative minimum tax which has threaten to tack an average of $3,700 onto the bills of taxpayers for the current year of taxation.
Leaders from the Republican and the Democrats parties say that they are very determined to take on the fiscal cliff. However, some of the Democrats and the policy analysts have gone on to suggest that it may better if the country actually went over the fiscal cliff. Immediately the tax hikes have started the cliff divers have argued that the Republicans would be pressed hard to roll all of them back. Republicans and Democrats elevated the political brinkmanship on the fiscal negotiations on Sunday in Washington. Timothy Geithner who is the Treasury Secretary challenged the Republicans to make improvements on his offer which the Republicans had dismissed by referring to it non-serious and also an attempt of undermining the negotiations. Timothy Geithner who is currently the chief negotiator of President Obama with the congressional Republics said to the "Fox News Sunday" that the white House has put plans that are detailed and that have balance but he is very willing to listen to any suggested improvements on the same. In case the Congress and the White House do not reach a deal, $500 billion tax hikes and severe federal spending cutbacks will start on January 1st. Cuts on spending are part of deal between the Republican and the Democrats after a failure to reach more measured agreements on the way forward in the reduction of estimated $16 trillion debt that the country has. Cuts on spending would result to an estimate of $1.3 trillion in the 10 years.
Republicans have been asked to accept the tax increases in the generation of revenue so as to cut the deficit. The Democrats are also being asked to reduce the government spending, especially the entitlement programs like the Social Security and Medicare, to reduce the deficit. Allowing some laws to expire or take effect in the year2013 will reduce the 2013 deficit in half and also reduce the sharp rises of future debts and deficits for the coming decade and beyond. Nevertheless, the 2013 reduction of deficit will severely affect the country's economy in the short-run. Meanwhile, if the Congrats extend the current policies, debts and deficit will rapidly rise over the coming decade and beyond which will lead to slowing the economy on the long run and also dramatically rising the interest costs. The fiscal cliff negotiations will very much affect the 2014 midterm elections as the results of the negotiations will act as a measure of how the leaders can make proper decisions and hence their worth to be retained in office.
Work cited
Calme, Jacky. AN UPDATE TO THE BUDGET AND ECONOMIC OUTLOOK:FISCAL YEAR 2012 TO 2022. August 2012. 2 October 2012. <http://cbo.gov/sites/default/files/cbofiles/attachments/43539-08-22-2012-Update_>.
Lowrey, Anne. Fiscal Cliff May Be Felt Gradually, Analysts Say. The New York Times. 9 October 2012.
