- Posted November 11, 2012 by
This iReport is part of an assignment:
The Fiscal Cliff - Why Should I Be Worried?
Granted Iran and Al Qaeda continue to pose the biggest military and defense threat to the US of A, but there is another threat which may do the nation more harm than anything that either jihadists or the Iranian government could ever do. That threat is aimed right at the fragile American economy.
The threat has been dubbed the fiscal cliff. Surprising there are some who have little or limited knowledge of this threat or the potential it has to sink or at least do great damage to the sluggish US of A economy.
Just what is the fiscal cliff and why is it such a threat to the national security?
To simplify what the fiscal cliff is we'll break it down into 7 main points. Each of these points actually involves more than just one action or inaction that may or may not occur depending on what Congress and the White House can determine to stave off plunging into an even worse economic nightmare.
1. On December 31, the Bush/Obama tax cuts are due to expire. This is not just income tax cuts, but also involves tax cuts on investiments, married couples and families with children along with inheritance. To further complicate the cuts set to expire, around 26 million people will be impact of the alternative minimum tax which would average a $3,700 tax hike.
2. At the start of 2013, the Department of Defense must cut 9% from its budget. In addition domestic programs will be cut by $55 billion. There is a 2% reduction in payments to Medicare providers included.
3. Unemployment benefits for those who are part of the long-term jobless will also expire.
4. In addition to the 2% Medicare cut, reimbursement for participating Medicare doctors is set for a sharp decrease.
5. The 2% payroll tax cut which American workers have enjoyed over the last 2 years will expire and there's little movement to extend this cut with the impact it has already had on both the Social Security Trust Fund and the Medicare Trust Fund.
6. Tax "extenders" which include various tax cuts for businesses and individuals will go away. Some of these "extenders" include tax credits for research and development as well as a deduction for sales taxes in those states which do not have a state income tax.
7. Making matters worse, the nation is expected to hit the debt ceiling, the amount the government can borrow, by year's end. The current cap is at $16.4 trillon. With adjustments and juggling the books, the Treasury Department can forestall this battle for a couple of months to allow for the new Congress to be seated.
When put together, the fiscal cliff has the impact of throwing the nation back into recession. Unemployment is expected to rise above 9%. The nation's credit rating is also at risk. Moody's has already warned that failure on the part of Congress and the White House to react will likely lead to it downgrading the US of A from its triple A rating. Standard & Poor lowered the rating last year over the debt ceiling fight.
The estimated cost of the fiscal cliff is approximately $637 billion. That's a big chunk to pull out of the fragile economy. Evidence of the impact of the fiscal cliff is already being felt on Wall Street as the stock market plunged this past week. The plunge of course was for a variety of factors: the election, the situation in Europe, the uncertainty over whether Congress and the White House will act on the fiscal cliff.
The fiscal cliff does not include more taxes and fees which be implemented in 2013 from the Affordable Care Act. Those new fees and taxes will only add to the pain if Congress and the White House do not act on averting the fiscal cliff.
From the Cornfield, as I have stated in the last few days, the time for partisan rancor is over. It is time for our elected officials, all of them, to knuckle down and address the danger at hand that is set to catapult the country into a swamp of financial destruction.