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The Fiscal Cliff: Three Words You Won't Hear "Budget Control Act"

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The BCA refers to the Budget Control Act of 2011, which will have it’s greatest effect on Jan. 1, 2013. The legislation has yet to be agreed upon in Congress, but that doesn’t matter and we’ll get to why that is. The legislation was drawn up by President Obama on July 31, 2011 and was signed in on August 2, 2011 (3 days to pass a major bill, but it still takes forever to get a passport renewed). It has been discussed, debated, and has been attempted to be derailed by just about everybody. Needless to say, it’s an unpopular action because most people don’t seem to understand it.

Ask an economist to explain it; it’s like asking a physicist to explain String Theory over lunch – IT CAN’T BE DONE. There’s a lot of number moving and distorting, budget cuts, tax cuts, tax hikes, legislation expirations, sequesters, etc. Well let’s try to make it more palatable.

John Boehner President Obama
The main action of the legislation was a response to the debt ceiling crisis of 2011, so naturally the BCA raised the debt ceiling another $2.1 trillion (or up to $2.4 trillion if there is an emergency). Subsequently, it sets caps on over 1,000 government programs from now until 2021.

So what has everyone up in arms about “The Fiscal Cliff”, and what the year 2013 will bring? Well, we have tax cuts from 2003 that are about to expire and Obama’s tax plan is about to go into effect. The problem is that there really aren’t any tax cuts in place, there’s just more tax brackets (income based) – at least that’s how most people should see it. Once Obama’s tax plan goes into effect, certain tax brackets will merge with other ones and about half of the groups will experience tax breaks because they’ve either been lumped in with lower brackets or sucked up into higher ones. Yes, that means about half of these brackets will experience a tax increase of up to 5%.

Let’s make an example: You earn $44,000 in 2013 (the projected average US income). Under the expiration of the tax cuts you would have $37,400 left after taxation. If the taxes didn’t expire you would have $37,847.50 left over. That’s about 1% less money, and where is that money going? It’s going to reduce our nation’s debt. This is where the bipartisan debate begins.

Democrats say that this is good because it reduces the national debt, which is going to have to be paid one way or another, why start later?

Republicans say that it is a governmental infringement on our rights as citizens, we earned that money – it’s ours.

Well they’re both right unfortunately, folks. Yes, it sucks to lose some money that you’ve earned and worked hard for. On the flip side, our nation will be stronger and no longer at the same risk as Greece and the rest of Europe.

All and all, there really isn’t anything that we can do about this as citizens other than call our state representatives and tell them how we feel. If you want this writer’s opinion…I think that come 2013, people will realize it wasn’t much a fiscal cliff as it is a curb.

Contact Anthony Nicoletta at anico362@live.kutztown.edu

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