With the election done, the question turns to the approaching crisis of budget, taxes, and social programs.
Back in June, 2001 the Congress lowered tax rates. Again in 2003. Together these actions comprised the Bush Tax Cuts. Set to expire in 2010 (at the time of passage, it was thought (or claimed to have been thought) that larger reform would be accomplished by then), they have been extended to the end of 2012. And there’s currently no deal to extend them further, leading to a situation whereby tax rates revert to their former levels (which can be sneakily called rate hikes).
Budget sequestration. Enacted in August of 2011. This is the set up to a perverse game of chicken, in which the Democrats and Republicans tie themselves together and race headlong at the cliff, and if either fails to turn away in time, we all go over.
All of the non-exempt departmental budgets will be cut by a quarter-percent.
But what is the cliff itself? It is a combination of lower revenues from the tax cuts, which created the trench, and increasing costs/outlays, creating the ramp. We’re moving along a curve, and come the end of the year (technically the cliff hits in a more nuanced way), the curve drops off and the trench closes up as revenues increase due to rates returning to normal.
It’s not really as much of a cliff as a ramp. Into a revenue wall.
The fear is that the turmoil of decreased government spending, coupled with increase pressure from taxes, will lead to a recession.
All of this is overshadowed by the larger fear that the government no longer functions properly, and won’t deal with the underlying causes of the cliff in a meaningful manner.
That is, between the military budget, Social Security, Medicare, and the broken tax code, we face long-term debt and deficit issues that impact our ability to adhere to our values.
The Republicans believe that we should cut the government down to size, except for the military.
The Democrats believe we should raise revenues through tax increases.
In many ways, the entire cliff is built out of the same sort of crisis the Republican party should be going through in the wake of the 2012 election. They have shown an inability to adjust their values to the modern world. They weren’t willing to take up immigration reform when it was their own president, George W. Bush, pushing for it. They continue to try to enact draconian measures against women, including efforts to block access to contraception and abortion.
We face a similar crisis of values. Our military is too large. Our prisons are too full. Our tax system offers perverse incentives. Our medical system uses misguided payment arrangements such as fee-for-service. And so on.
Big military replaced the value of security. Big prisons replaced the value of justice. Tax loopholes replaced the value of government by the people. Fee-for-service and similar money-first schemes replaced the value of pursuit of happiness.
Reelection and career politician replaced the value of government of the people.
Our underlying values are still strong, but their weak counterparts, their value-for-dummies equivalents, are detriments to the functioning of our system.
The supposed traditionalists, the Republicans, are not calling for a return to our true, core values. But the Democrats are silent on most of them as well (notable exceptions being things like equality under the law when they call for recognition of marriage).
In the end, it’s unclear whether the fiscal cliff will scare the congresscritters into action.