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| 'Bread line' during the 1930s era depression |
OK. I don’t actually
wish that they get some sort of horrible disease… like the Bubonic Plague. But
I am thoroughly disgusted with 2 out of the 3 separate but equal branches of
government. The Executive and Legislative.
For those not familiar with the issue now before us... there is something about to happen (if nothing
is done) that may well destroy the economy far worse than than anything that has happened since the depression
of the 1930s.
Although what follows is an over simplification, I think it will explain in a general way what the problem is and why both political parties are to
blame.
If congress doesn’t pass a budget which will be signed into
law by the President, by the end of this year, then on January 1st
2013 taxes will rise on everyone. Rich and poor alike. And major ‘Draconian’ cuts
will be made to the federal budget in all government programs. Including vital ones like defense.
This will put
enormous downward pressure on the economy. It will stifle consumer spending; which will stifle production of goods and services; which will cause a substantial increase in unemployment…
which will further negatively impact the economy into an accelerated downward
spiral. I can almost see a 30s style depression taking hold.
These first of the year government budget cuts and tax increases are automatic.
They were passed by congress for purposes of pressuring the government to
balance the federal budget. Without such pressure it was felt that the deficit would continue to increase to the point where it would damage
the economy in another more serious way. Perhaps irreparably. The world would
lose faith in the American dollar. Which would reduce its value substantially. And rather suddenly I suspect.
Worst case scenario - the value of the
dollar could spiral downward and out of control. In today’s global economy the impact could be
even greater than it was when it happened in Germany post World War I. Inflation was so rampant that the German mark
became virtually worthless. And we all know what Germany did after that. This
scenario has been labeled going over the fiscal cliff by Federal Reserve
Chairman Ben Bernankhe. I think that is
an apt description.
What’s holding back a passing a budget? Foolish posturing by
both political parties.
On the one hand the
President and Democrats in congress wants to increase taxes on the wealthy. His
most recent proposal being that people making over $400,000 a year should have a
tax increase. They can afford it - and
it’s only fair says the President that the rich contribute their share. That’s
true.
But the Republicans in congress argue that it is nothing
more than a symbolic gesture and that the increased revenue will be
insginificant in trying to achieve a balanced budget. That’s true too.
Republicans want to
see a reduction in government spending on entitlement programs. The President and Democrats in congress refuse to do
anything significantly more than what has already done in that department – claiming
that any further cuts will hurt the elderly; the poor; and even the middle
class. They claim the cuts already made go far enough.
They are both right. It will not kill anyone if the rich pay
a little more in taxes next year - but it will not make one iota of difference if
they don’t. Were either side to give in on this issue no one would lose anything
but their own pride.
On the other side of the aisle, if the President remains stubborn
about refusing to cut spending even if
it is for good reasons having to do with fairness or protecting the environment
- wait until January first. Then all of
those programs will be cut and then some. All the programs he wants to spare
would be in worse shape than if he were to gives into Republican demands to reduce spending on them now.
And yet neither seems to be willing to budge. If the economy collapses because of this, both
the President and the entire congress of the United States ought to both be
fired!
