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Tackling the Fiscal Cliff

By far, the most interesting topic that we’ve studied in Government is the fiscal cliff. One of the main reasons why this drew my attention was because I had no earthly idea was this “fiscal cliff” was that everyone seemed to be buzzing about. I could assume from the name that it had something to do with money, but that was about it. Mr. Ostroff, our teacher, decided to take this topic one step further and challenge our class to not only define the problem, but also develop a solution. At first, I was completely intimidated by this prospect – I spend a good portion of my afternoon trying to figure out how to break it to my mother that I was going to fail Government – but after beginning the research process, I realized that understanding the fiscal cliff wouldn’t be as difficult as I made it out to be.

The fiscal cliff refers to government spending cuts and major tax increases. Should we fall off of this cliff, Americans will deal with more federal taxes and the expiration of multiple tax cuts. According to estimates from the Tax Policy Center, the average federal tax rate will increase from 19 percent to 24 percent (Robertson 7).  This would affect wages and salaries, interest income, long-term capital gains, and qualified dividends (Robertson 3). Also, households will struggle with the temporary expiration of the Social Security tax cuts along with the 2001/2003 tax cuts (Robertson 3). The 2001/2003 tax cuts refer to the Jobs and Growth Tax Relief Reconciliation Act of 2001 and the Economic Growth and Tax Relief Reconciliation Act of 2003 (Robertson 4). Although I may have to refer to my notes for specifications such as which tax cuts are expiring, I will permanently remember the fiscal cliff as spending cuts and tax increases.

Understanding the fiscal cliff itself wasn’t too much of a challenge for me after all. It boiled down to two key ideas, which I mentioned above. Of course, the more difficult part of the project had yet to be accomplished: the solution. To this day, this is the most challenging task posed to me in Government. I will never forget the countless hours I spent researching online and in my textbooks to try and figure out how my team would tackle the fiscal cliff. By the time presentations rolled around, we were still uncertain about whether our solution was ideal for America. Even Mr. Ostroff noted at the end of our PowerPoint that we basically restated the idea of the fiscal cliff itself: Our solution was a reduced amount of expired tax cuts and spending reductions. Although we had little success in determining a proper solution to the fiscal cliff, I know that everyone learned a lesson about humility from this project.

ImageWhen Mr. Ostroff first presented this topic to our class, the majority of us expressed disappointment in the fact that the government hadn’t developed a solution to this problem yet. It seemed easy to us – the inevitable solution to debt is repayment, so why couldn’t the government just earn the money to pay everyone back with?  I, personally, was slightly angry with the White House and assumed that they were simply dodging the issue altogether instead of resolving what appeared to be a simple issue. Multiple students lamented about this throughout the beginning of this lesson, accusing the government of being lazy. Pursuing our own solutions to the fiscal cliff truly humbled me and made me realize that it isn’t at all easy to come up with a solution – especially when you’re a government that is trying to satisfy its entire people! That is part of the challenge of being a democracy. They may never come up with a perfect solution, but I believe that the government can come up with a suitable resolution given enough time. The only question I have now is whether the governments anxiety has turned into complete avoidance of the entire issue itself.

Citation:

Williams, Roberton, Eric Toder, and Donald Marron. “Toppling Off The Fiscal Cliff: Whose Taxes Rise and How Much?”Joserobertoalfonso. Tax Policy Center, 1 Oct. 2012. Web. 29 Nov. 2012.

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Categories: B2, Learning
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