Fiscal Cliff: Be flexible in seeking solutions
Last year we had a big standoff on raising the national debt ceiling. It was very strange in that Congress has repeatedly passed budgets with deficits over the past several decades and suddenly decided that the national debt had grown too large. Then they decided the best course was just to stop borrowing money.
An apparently simple solution to a growing problem. But perhaps was too simple. People with bonds would like to be paid when the bonds come due. Soldiers and civilian employees both like to be paid. There are quite a few valid concerns raised by this approach.
So in recognition that the problem was a bit more complex then just not spending, Congress agreed to allow debt to rise but mean while would appoint a Super-committee to decide on both revenues and budget cuts which would once again bring fiscal sanity to our federal budget. And to make sure the job was done right, Congress proclaimed that there would be draconian budget cuts and tax increases if we did not have a plan in place by the beginning of next year (which is just a few weeks away now).
So one of the sticking points is income taxes. President Obama is pretty insistent on raising the tax rates on households making over a quarter million dollars per year. Republicans are insistent that this rate won’t be raised.
Everyone would like to see tax cuts continue on for households making less than a quarter million dollars per year (About 98% of us). But Republicans say they won’t agree unless the households making over a quarter million dollars per year are included (about the top 2%).
If there is not an agreement taxes rise on everyone which combined with the draconian budget cuts might be enough to throw this weakly recovering economy back into recession.
So a compromise is needed. Both sides like to repeat their position and do insist that it is the correct position. But there is some movement behind closed doors toward the compromise we need. Some days the reports are promising, other days not so much. Let us hope both side can show some flexibility.