By NICK THOMPSON
As a young college student surviving on canned tuna and cheap beer, there was not much that met the eye for me for some time on this whole fiscal cliff thing. All that I had heard was that tax hikes and spending cuts were coming, and Congress will be dysfunctional as always in solving the problem.
That was before the election, and at that point I was still jealous that Mitt Romney had binders full of women. But for whoever came up with the term fiscal cliff, their little nickname for big time austerity is catching the attention of Nobel Laureates and middle and low- income earners nationwide. Why? Nearly everyone will be affected if the United States jumps off the cliff by years’ end, as 90 percent of households in the nation will see some increase in taxes.
When first researching the cliff, I saw little impact on me. I’m not exactly cashing in stocks for capital gains or getting a tax deduction for my mortgage yet. Honestly, with my student loan debt I doubt I’ll be able to get a mortgage loan for a while, but I digress. When looking at the fiscal cliff, even I, the lowly college student will be affected. The payroll tax cut is on the table, and the tax will very likely increase back to 6.2 percent from its current rate of 4.2 percent.
According to a New York Times piece in September, the typical family had an additional $1,000 in income from a lower payroll tax. For me personally, that tax cut meant maybe an extra tank of gas or a concert ticket with the added income. But the payroll tax cut will be gone by next year, and that’s something Washington Democrats and Republicans actually agree on.
Most Americans by now have seen the evidence, and know the fiscal cliff will affect them. We now have less than a month until automatic spending cuts and tax increases begin to take effect. It seems most are worried time is running out, and after the 2011 war over raising the debt ceiling, most Americans are not about to put their trust in Congress to make a deal.
From what you watch and read, it seems like pandemonium will break out in the markets, and investors are trying to pull back before capital gains tax rates shoot through the roof. That’s something for you to take up with your broker to see if you should start selling. December is typically the best month of the year for the market, and it seems like a bad time to be teetering on a cliff as an investor.
I do not believe I have paid attention to a national public policy issue in my lifetime that will have such grave effects as this. What’s more, it is up to a politically divided government to solve the problem, and do it in less than thirty days. And after missing all of the Sunday talk shows, I caught up and found of course that no significant progress has been made.
The issue has kept the campaign going, as President Barack Obama saw the election as a reminder that America agrees with him on taxes. Democrats know that $2,000 more in taxes for a household with $50,000 in income means less saving for college, or maybe one less road trip to visit relatives.
Republicans, however, contend that wealthy earners are the job creators. And who can fault them for that belief? A recent New York Times piece about taxes shows that those people are paying a smaller share than they did in 1980, but are still paying most of the burden. Further, with Obamacare, many small business owners fear what Uncle Sam can take.
This nation has serious political entanglements that I do not expect to get solved in thirty days. For one, Democratic economists are going to argue for short-term stimulus. There is plenty of convincing analysis out there for that, but good luck negotiating that with Republicans, who loathed the 2009 Obama stimulus, but then Democrats have argued that the spending was not effective because it actually was not enough stimulus. I think you might be seeing my point.
And do not forget a serious disagreement over what purpose entitlements serve in the United States and how they should be changed, if at all. Democrats believe they are part of the American character. Republicans would like Medicare to be premium assistance as opposed to government insurance if they had it their way. I do not expect a dysfunctional Congress that was the first not to pass a farm bill to reform entitlements in less than thirty days.
President Barack Obama feels a shared sacrifice by top earners should get this country back to where it needs to be fiscally. However, Republicans will have to see the President sacrifice his spending, something they do not believe they have seen so far.
In a way I feel for the politicians. There is a lot to grapple with here. But in a way I do not. This country gave these people billions of dollars in campaign funds to figure this stuff out this year. I think most Americans want Congress to know that a tax hike will hurt their wallet, even if it is chump change to the lawmakers.
Most agree America has to increase revenue and decrease spending. You could make the argument that we should just jump off the cliff. It would force America’s hand in facing the challenges of our day. The more I look into it, I am ready to make the jump if it means we all learn something about shared sacrifice for the good of our nation.
Maybe Kennedy was right. When the payroll tax cut expires and takes a few jars of peanut butter away from me, I’ll feel okay with doing it for my country.
But before I jump off the cliff, I’ve got one more paycheck to do it big.
Thompson is a junior majoring in journalism at the University of Missouri.
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