The Fiscal Cliff: A Disguised Blessing?
The so-called “fiscal cliff” seems to be everybody’s focus today. The goal of any agreement to avert going over this cliff to automatic tax increases and spending cuts should be to ensure, by a fixed date, future budgets are controllable and balanced. There must be a focus on the effective use of funds and away from programmed spending increases. As well, government debt must be lowered continually; anything less will be the status quo.
Does anyone not want a balanced budget and reducing debt? No; the issue is philosophy, which will affect timing and method. The president’s approach will include tax increases on business, will stifle business activity, and lower economic growth. Doing nothing will cause cuts to future increases in many government programs. This too, will hamper short-term economic activity. So will a compromise, which inevitably will result in tax increases.
Suppose the president and Congress work out a deal before the year's end? Does anyone think the USA’s economic problems will be over? The economy is structurally unsound. If an individual managed her affairs like the federal government, she would not survive.
The government does not create wealth; it generates expenses. Which household could decide a budget this year and then guarantee it will rise perpetually? Essentially, that’s what government does. To fund this irresponsible attitude, it borrows to pay for its expenses, and borrows to pay the interest, to boot. Solving the fiscal cliff is relatively insignificant. Indeed, the cuts are spread over 10 years. For a private business, this would be a great opportunity to look to improving effectiveness.
Continued on the next page
Governments are inherently inefficient and ineffective. I came across a recent example at home in Canada, where the federal government spent about $1.2 million to answer written questions ($4000 each) from opposition parties. Instead of working to lower this cost, government wants questions to stop.