No matter who becomes President on November 6, 2012, a crisis will follow. That is because the nation faces a “fiscal cliff.” We face a fiscal cliff because nearly all Americans will start paying higher federal taxes. Deep cuts in federal spending will also take place.
Congress lowered taxes for the wealthy and middle-income in 2003. The tax cuts included a 2.3 percent reduction in the payroll tax for social security. The general tax rates also went down. The cuts end on December 31, 2012.
Federal spending on defense and other programs will also go down at the end of the year. That is because Congress ordered spending cuts as part of the agreement to increase the federal debt ceiling.
Economists believe a combination of higher taxes and lower spending will send the nation back into a recession.
The only way for the nation to avoid going off the cliff, they say, is for Congress to act in a “lame duck” session following the election.
Experts say consumers are not worrying about the fiscal cliff. Consumer spending has been a big part of the modest financial recovery. Spending on housing is slowly rising and auto sales are good. But, gas prices are going up and credit is hard to come by.
If the nation goes off the fiscal cliff it will be very bad for consumers.