Financial Cliff, A Fall ? or, Merely a Small Step

The “financial cliff” isn’t as bad as it is being made out. Primarily the fear that continual reference to the cliff is more of a danger than the actual cliff itself. Essentially what is meant is this — Tax Cuts enacted during the Bush administration, if not extended, would expire. If the tax cuts expire than the taxes as computed during the Clinton Administration would become the way taxes would be computed as of January 1, 2013. So taxes would go up. We’ve had greater tax increases in history. It would not be such a bad thing. If you got along in 1998 than you would not be doing so bad in 2013. And, as a bonus, the humongous deficit for the current year would be halved, with the national debt over coming years considerably improved.

The worst that could happen would be for the Wall Street hustlers and their Republican and Bluedog stooges would use the fear engendered to ram through massive tax cuts for the rich or to steal the Social Security Trust Fund. The Cliff and Social Security have NO relationship, the cliff does not require any action regarding Social Security whatsoever.

For further explication a memo from the Dick Burkhardt, Secretary of the Unitarian-Universalists for a Just Economic Community, follows:

Budget deficit:  If nothing is done, the deficit current annual budget deficit will be reduced from $1.3 trillion to $700 billion, still 30% of current revenue ($2.3 trillion).

Economy:  At a time of high unemployment, reducing demand across the board by $600 billion a year would send the economy into recession, increasing job losses. However, if the cuts were restricted to wealthier individuals and the military, the result would be a reduction in wasteful spending and an increase in economic equality. This would have very positive longer term social and economic effects.  Even better, instead of it all going to deficit reduction, some of it could go to building a green economy for future generations, to maintaining infrastructure, to supporting a more cost-conscious Medicare for All, and to supporting more and better education, including student loan forgiveness and help for hard-hit local budgets.

National debt: With extremely low interest rates, the current US debt of $11.4 trillion, though 72% of current GDP ($15.8 trillion), is not that big of a problem in the short run (about 10% of revenue went to interest last year). However the debt has almost doubled since 2008 – in effect, a $5 trillion transfer of national wealth to Wall Street, which should have paid for the crash it caused. Also it will be difficult to pay off the debt in the long run simply because the modern era of economic growth is coming to a rapid end as the world maxes out on critical resources like oil and suffers increasing damage from climate change. A wise policy would be to institute a progressive annual wealth tax, starting, say, at $2.5 million per household, dedicated to paying off the national debt over 10 years, treating the national debt as a bill for all the swindles engineered by the wealthy against the public since 1980.

Social Security and Medicare: The fiscal cliff has nothing to do with Social Security or Medicare, except that certain billionaires want to use this as an excuse try to privatize or reduce support for them.  Social Security is actually in good financial shape for another generation, though it could use some fine tuning and more progressive taxation. However Medicare has been running a big deficit. Medicare costs could be reduced in several ways:  more auditing to reduce fraud,  unified negotiations for prescription drugs, coordinating dual coverage, requiring better science for treatments, more preventive care and public health type programs, and stiffer requirements for very expensive or exotic treatments. International comparisons indicate that reducing economic inequality would have a very positive effect on health over time (read “The Spirit Level”). A good goal would be “Medicare for All”, starting by lowering Medicare eligibility to age 60, financed in part by cost reductions and in part by higher taxes on the affluent. The individual and business savings on insurance would more than offset the tax increases.




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