Fiscal Cliff for Dummies

Congress on fiscal cliff talks
Congress on fiscal cliff talks

If you’ve been paying attention to political and financial news since the election, much of what you’ve been watching has been dominated by talks of the Fiscal Cliff. But for those of us who are not paying close attention, and even some of us who are paying very close attention, it’s still pretty difficult to explain exactly what the hell this “cliff” is and why is it so fiscal. If you do decide to look in to it and not get immediately bored you’re still left with questions like what is the fiscal cliff, what is the fuss all about, why is it so important, and what does it have to do with you? Well, short answer is you probably shouldn’t care as much. They way it’s being talked about though, one could be led to believe that at the end of the year if something (who knows what that may be) isn’t done this country could be headed for disaster. Even the terminology of the imaginary cliff leads us to believe that we could be headed for a stark free fall.

So at this point we only know the political and financial world is coming to an end. How, is the big question though. Starting January 1, 2013 several laws are set to change which would cause tax increases and spending cuts for many. The reduction of what the federal government spends from what is makes would be cut almost in half, which is what’s causing some to call it a fiscal cliff. At the beginning of the year the terms of the Budget Control Act of 2011 are scheduled to go into effect. Workers would be taxed an additional two percent, businesses would lose certain tax breaks, additional taxes from the Affordable Health Care Act go in effect, and other items could all effect stock market confidence. But that’s what it’s all about anyway, stock market confidence, that’s the road our economy follows.

Well if you are still with me and those last couple of lines didn’t make you start bashing your head in with your mouse, know there’s good news ahead. Even though it had been termed fiscal cliff by Ben Bernake, when he described what would take place at the start of the new year, many analyst would say it’s not as steep, if you will. A fiscal slope or fiscal hill would be a more proper description. If nothing changed in the laws, we’d see little to nothing happen immediately. The effects would come in the later weeks and months if the United States government cannot get it resolved. So getting it resolved by the end of the year wouldn’t be exactly dire. Again, if an agreement isn’t reached the best we’d see in the first week of January is a drop in the stock market. But that could happen either way.

Not for nothin’ but don’t be fooled. This fiscal cliff is just an excuse to keep politics in the headlines. Often times we’ve seen and heard how our government disagrees, specifically when there’s a president from one party and Congress is controlled by the other party. The two of them don’t see eye to eye on many issues, and the fiscal cliff is another one. It’s not like they’re going to willing allow our country to go down the drain. And if all else fails, they’ll find some extension to take us through to a point like we have now and we’ll see another crisis next year.  But if you still have concerns, think back to about a year ago when there was significant talk on another financial issue that our government had to work through. If the debt ceiling doesn’t ring any bells to you now, then this fiscal cliff would likely leave the same impression.

*If you are still not sure what the fiscal cliff is, don’t worry you’re not dumb because the majority of the population isn’t sure either. And don’t feel bad for not caring.

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