Fiscal Cliff

http://video.about.com/entrepreneurs/Entrepreneur-Profile–William-Penn.htm

The video is from about.com

The greatest question to be answered after this election is Will politicians save us from the fiscal cliff ? Ultimately, they will because both Republicans and Democrats understand the damage this will cause to our economy. What do they mean by fiscal cliff ?, according to about.com, ““Fiscal cliff” is the popular shorthand term used to describe the conundrum that the U.S. government will face at the end of 2012, when the terms of the Budget Control Act of 2011 are scheduled to go into effect.” This means that automatic budget cuts will take place, there will be changes to the temporary payroll tax cuts, the end of certain tax breaks for businesses and others. There are at least three possibilities.

They can uphold the current policy scheduled for the beginning of 2013 –that have a number of tax increases and spending cuts that are expected to weigh heavily on growth thereby causing a great recession. The second option is to cancel some or all of the scheduled tax increases and spending cuts, which would add to the deficit or they can compromise. If they don’t compromise taxes across the board will go up, there could be devastating budget cuts and the credit worthiness of the U.S could be in danger.  What think will happen?

President Obama will  keep the Bush tax cuts for the wealthy and in return he will ask the Republicans to work with him on tax reform so that wealthy individuals could pay more money even if it’s at the same rate. As far as the middle class tax rate is concern I think that ultimately we will have to pay a bit more whether the Bush tax cuts are kept or taken away.  I also think Democrats will be forced to give up on not touching Social Security and other entitlements. There will also be modest budget cuts. No matter how this issue is resolved both sides will have to give up something. The President doesn’t have to get re-elected but House and Senate members do.

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