Because of the timing of temporary legislation, our government faces the following action, effective in 2013:
- The Bush-era income tax cuts, which were actually enacted into current law by President Obama are set to expire. This means most taxpayers will see their rates go up and many non-taxpayers will start paying.
- The alternate minimum tax patch that protects many middle class Americans from higher AMT rates will also expire.
- The payroll tax holiday will also expire, adding another 2% in payroll taxes to the first $100,000 that workers pay.
- Automatic spending cuts will be enacted to national defense and Medicare reimbursement rates.
- The Medicare "doc fix" will expire, reducing reimbursement to Medicare providers even further.
My analysis is that we should jump off the fiscal cliff, Thelma and Louise style. The argument against it is that such action would trigger a recession. To that I would argue that politically it will never be the right time to address this problem. The reason that now is the right time is that action is easy. All that has to happen is for the Republican House leadership and President Obama to fail to find common ground. That's a lot more likely than an alternate scenario where the President and Congress maturely make tough choices that benefit America in the long run.
I have to take a stop now. My sides are hurting from laughing at the prospect of my last sentence actually happening.