The National Association of Manufacturers (NAM) recently reported that, if Congress fails to avert the “fiscal cliff” by the end of December, six million jobs will disappear over the next two years, sending the unemployment rate soaring to near 12 percent.
NAM says companies are bracing now for the fallout by laying off workers, leaving jobs vacant and postponing major purchases.
“Fiscal cliff” is the popular shorthand term used to describe the conundrum 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.
Among the changes triggered at midnight on Dec. 31, 2012 are the end of last year’s temporary payroll tax cuts, resulting in a 2 percent tax increase for workers, the end of certain tax breaks for businesses, shifts in the alternative minimum tax that will mean higher income taxes, the end of the Bush tax cuts from 2001-2003, and the implementation of taxes related to President Obama’s health care law.
In addition to those tax increases, we will see an automatic 9.4 percent cut in the defense budget and more than 1,000 other government programs, including Medicare. William H. Gross, founder of the investment firm Pimco, argues that, if Congress doesn’t reach a deal soon to avert the fiscal cliff, rating services and global creditors may desert the US in favor of "other nations more focused on breaking our long-term habit of debt addiction.How addicted to debt are we?
According to CBS Money Watch, in 1791, our entire national debt was $75 million. Today, we borrow that much every hour. The national debt, which has increased by half in just the last three years, now stands at more than $16 trillion — that’s $135,773 per taxpayer.
How much is $16 trillion? If you paid out one dollar every second, it would take you 496,000 years to pay off our $16 trillion debt.
Our addiction to debt has long-term consequences for our children and grandchildren because they will pay the bill for our generation’s irresponsibility.
David Walker, former Clinton and Bush Comptroller General of the United States and head of the Government Accountability Office from 1998 to 2008, compares the present-day United States to the Roman Empire in its decline.
Walker says the U.S. government is on a "burning platform" of fiscal deficits, swelling Medicare and Social Security costs, the enormous expense of a prospective universal health care system, and overseas military commitments. On CNN, he said the United States is "underwater to the tune of $50 trillion in long-term obligations.
A key immediate problem is the astronomical costs associated with the Affordable Care Act, commonly referred to as Obamacare. The new federal health care reform law will cost $1.7 trillion over 10 years, create approximately 50 new government agencies, offices or commissions and make it more expensive for businesses to employ workers.
U.S. health care costs are already ballooning — outstripping our tax revenues by an ever-increasing amount. When you add the interest payments on our rising federal debt, by 2035, total federal spending, including interest, approaches 35 percent of the U.S. economy.
Premera Blue Cross President and CEO Gubby Barlow believes health care costs no longer threaten just company budgets — they now threaten the entire economy.
United States health care spending averages $9,000 for every man, woman and child. By 2020 after the ACA is fully implemented, officials estimate costs will rise to $14,000 per person.
Walker hit the nail on the head asking, “Isn’t it about time for the president and Congress to be leaders rather than laggards?”
Somebody must pay for all of this borrowing. That somebody is our children and grandchildren.
About the Author
Don Brunell is the president of the Association of Washington Business, www.awb.org.