With the election now over, there is a much bigger crisis looming over the horizon. This is the much talked about fiscal cliff that is set to happen January 2013.
Indeed, if Democrats and Republicans do not reach a budget deal by that date, then income taxes for almost everyone in the country will rise.
Also, about $1.2 trillion of spending cuts in entitlements and military will take place.
Military spending will be cut by roughly 9.4%, Medicare will be cut by 2%, and other discretionary entitlements will be cut by about 8.2%.
The Bipartisan Policy Center estimates that if these cuts and tax hikes took effect then the damage would be devastating and could kill up to a million jobs in 2013 and 2014.
The Congressional Budget Office estimates that economic growth would decline by 2.9% for the first half of 2013 and unemployment could rise as high as 9.1% by the year’s end. So now that we understand the situation, what can we do about it?
Well, we already hear some Republicans like Representatives Tom Cole, Peter King, and Scott Rigell along with Senators John McCain, Bob Corker, Saxby Chambliss, Tom Coburn, and Lindsey Graham all say that they are willing to compromise on taxes and break Grover Norquist’s Taxpayer Protection Plan.
We also see Democrats and President Obama willing to bend on entitlements, at least when it comes to Medicare.
I say that we have to take a balanced approach. I think that the most important thing is growing the economy. The more people who work, the more revenue will flow into the government.
I also think that letting the tax cuts expire for people making over $250,000 is a good idea and will not hurt the economy. First of all, the rich right now have some of the lowest taxes in history.
The highest the top tax bracket has ever been was in 1945 when it was at 94%. Obviously that was mostly caused by World War II, and we were in a lot of debt.
Then the top tax bracket was lowered to 91% in 1946 and stayed mostly there for the next 15 years. It is important to know that these were some of America’s most prosperous times.
Now, lowering taxes usually creates short spurts of economic boom, but raising the top tax rates is not something that will automatically stop growth.
Also, I am not talking about stripping the rich for everything they have, just going back to what they were under Bill Clinton at 39.6%.
Taxes are only a small part of the solution, however. Medicare will only be able to run as efficiently as it does for the next 12 years.
Although this is not an immediate problem, we have to do something about it now before it gets too late.
Most of the public opposes cuts to Medicare, but we are not being realistic with ourselves if we do not do anything about it now.
We definitely cannot take away benefits from seniors already receiving Medicare, but maybe we could raise the Medicare tax of 2.9% to 3.2% by 2014 and then maybe 3.5% in 2015.
There is also the issue of raising the eligibility age of Medicare. I propose raising the eligibility age to 66 for anyone under the age of 60 and raising it to 67 for anyone under the age of 55.
I feel that this is not only reasonable but also probably necessary given the rising life expectancy.
Of course, we can also cut the amount of benefits that we will receive from Medicare in the future.
I personally would rather have to wait a little bit longer before receiving Medicare then having my benefits cut.
There are also many other cuts that can be made to the providers of Medicare. Overall, this fiscal cliff is a pretty big deal.
I only talked about two of the main issues that are going to be addressed one way or another coming this December. There are many other issues that might get cut if a deal gets struck.
So what is a good bill you might ask? One that stings. Cutting is not fun, but it is important before we spin out of control.
Growing our economy is the most important, so most cuts should take place on a long scale, but to be fair we should share the pain.
If we are all kind of disgusted over the deal that takes place this December, then it might actually be a pretty good deal.
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