Monday, December 10, 2012

Weekly Opinion Editorial
by Steve Fair

All eyes are on Washington D.C. as Congress and the President address what has been called the ‘Fiscal Cliff.’  Many people are confused and don’t understand what a fiscal cliff is.  The ‘Fiscal Cliff’ is the popular term being used to describe what will happen if the Budget Control Act of 2011 really goes into effect. 

Among the laws set to change on January 1st are the end of last year’s temporary payroll tax cuts.  That would result in a 2% increase for most workers in the country.  It will also mean the end of a number of  tax breaks for businesses.  The New Year also brings on the start of taxes related to ObamaCare. 
At the same time, the spending cuts Congress and President agreed to in early 2011 in order to increase the debt ceiling will go into effect. According to Barron's, over 1,000 government programs - including the defense budget will face deep, automatic cuts.

Speaker of the House John Boehner, (R-Ohio) has said lawmakers have a choice among three options concerning the cliff:

First, the government can let the Budget Agreement scheduled to go into effect at the beginning of 2013 go into effect. The plus side is the deficit, as a percentage of GDP, would be cut in half.  The down side is that it would mean hard times for a couple of years until the economy recovers.  It would be like taking a medicine that tastes bad but will cure what ails you.  Most political types are unlikely to take the risk of going over the cliff.

Second, Congress and the President could cancel or delay some or all of the scheduled tax increases and spending cuts.  That could mean adding to an already out of control national debt and increase the odds that the United States would face an economic crisis similar to that which is currently occurring in Europe.  It would also send a signal to the rank and file GOP members of the House that the House leadership’s word means nothing.  The newly elected conservative members agreed to increase the debt ceiling in exchange for future cuts in spending.  If that agreement is not implemented, Boehner will have no hope of getting them to trust him again.

Third, the feds could take a middle course, opting for an approach that would not raise taxes and address the budget issues by modestly cutting spending.  That approach is the coward’s way out and it would be just kicking the can down the road to let future Congresses address the root problem(spending).
The average American citizen sees a highly partisan political environment that can’t seem to get anything done.  Congress has had three years to address this issue, but Congress has largely put off the search for a solution rather than seeking to solve the problem directly. House Republicans want to seriously cut spending and avoid raising taxes, while Democrats want to raise taxes and make modest cuts.  It’s not likely the two sides will ever agree.

The ‘fiscal cliff’ will not only impact the federal government, but state and local government as well.  It is estimated that Oklahoma state government could lose up to $150 million in direct federal funding as a result of those automatic spending cuts set to take effect the first of the year.  A third of that would be in education and a third in health and human services.  Medicaid, Social Security, veteran’s programs and food stamps are not included in the list of programs set to be automatically cut. 

The exact amount the state will be cut is not certain, but it is almost an absolute certainty Oklahoma will not be receiving as many federal dollars as they have in the past. 
House Speaker-elect T.W. Shannon, (R-Lawton), has already conducted a study to look at a contingency plan on ways the state will have to respond when faced with reductions in federal assistance.  Tough times are coming. 
The bottom line is the federal government is broke and sadly will not recognize it.  The government doesn’t have a revenue problem- it has a spending problem.  We can’t afford these giveaway programs anymore!  According to USA Today, only 45.3% of the American population works and produces.  One in six Americans is on government assistance.  That is a path that is not sustainable.  If America is to survive as a country, we have to take a deep breath and dive off the cliff.  It won’t be easy, but we have to have the courage to do it.

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