Congress is holding tax payers hostage, as the looming fiscal cliff threatens to throw us back into recession. But is the so-called "fiscal cliff" really akin to financial meltdown? What would the sequester mean for Medicare and Medicaid? And what are the chances that Congress will do nothing more than change the January 1 deadline?
Those are just a few of the questions posed by Takeaway listeners about the looming fiscal cliff. Todd Zwillich, the Takeaway's Washington correspondent, has the answers to these questions and more.
How will Medicaid recipients be affected? What about people with developmental disabilities on SSI?
There's good news and bad news here for people who rely on Medicaid. The good news first: Medicaid is exempt from the sequester that will go into effect on January 1, 2013, if Congress is unable to come to a deal. But the bad news is that if a deal is made, Republicans want Medicaid on the table if they're going to agree to tax hikes. "They think that Medicaid is a major driver of cost," Todd says. "In fact, in the states, it is."
If a compromise isn't agreed upon and we do go off this fiscal cliff, will I see a difference in my take home pay right away in January?
If we do go over the so-called cliff, everybody's tax rates will go up. But the Secretary of the Treasury has the power to adjust the amount of withholding that the IRS, or your employer, withholds from your taxes. "We may pass January 1 with no deal, but the Secretary of the Treasury may know that they're probably going to get a deal in the next month or two," Todd says. It would become very complicated for withholding if the tax rates were raised and then lowered again. This will mean that, for middle-class tax payers, their income tax will likely be unchanged come January 1, deal or no deal. The payroll tax, however? That's probably going back up.
What does the fiscal cliff mean for my federal student loans?
Right now, people who make less than $60,000 a year receive a tax deduction on their student loans. If we go over the fiscal cliff, the threshold to receive deductions will be lowered to $40,000 per annum. "If you make around $50,000, and you're able to write off interest on your student loans right now, you might be left in the lurch if there's no deal after January 1," Todd says.
Give me three reasons why going over the fiscal cliff will be good for the economy.
"It's hard to imagine why going over the fiscal cliff would be good for the economy," Todd says. "The Congressional Budget Office has made it clear that it would be very, very bad." However, Todd does say that the fiscal cliff is a bit of a misnomer. "The economy doesn't tank the next day," Todd says. We could fall into another recession, but it wouldn't happen right away.
What are the chances that Congress will do nothing?
Todd says the chances are quite low. "The sequester is really the big thing that's preventing Congress from doing that," Todd says. "That's $1.2 billion of automatic spending cuts on January 1st if they do nothing."
Who coined the phrase "fiscal cliff" anyway?
Not to name names, but, well, Ben Bernanke. "Of course, people in the media took it and ran with it," Todd says. "Politicians love it, because it's dramatic, it has a deadline, and there's death at the bottom."
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Comments [6]
Equally important, say you're doing everything right. It's not YOUR problem, why should you be penalized because of all the others getting it wrong?
Because, living here means it's OUR responsibility. We can debate how much mine, how
much yours, but as long as this is OUR country - OUR responsibility.
Billions and Trillions of dollars is a LOT of money.
It's medicare, medicaid, military spending, social security, infrastructure, etc.
It's money allocated to states, counties, cities, and individuals.
It's the highways we drive on, the parks we visit, the wars we fight.
It's diplomacy, air / water quality, border patrols.
In the MACRO it's easy to manage - 10% here, 15% there. In the MICRO, it's my this,
your that - better your this than my that.
Even if we do cut, it's not enough to reduce the overall spending if we do nothing about the process that got / gets us there in the first place. What good is it to lose weight without addressing overeating or excessive sodium, fat, sugar content in unhealthy foods / unhealthy food choices? What good is it to buy a home you can't afford, the lender knows you can't afford, while the government looks the other way, bails out the lender and leaves you / us with the bill while you had the satisfaction of living in a home with a now underwater mortgage and are now walking away from so the bank can fix it and resell it to someone else at a profit and rate they NEVER offered you?
Every time the Fed Chairman speaks, my eyes glaze over. If it were truly simple, it would be done by now. If it's going to last and not be anything more than just a temporary fix, it won't be enough to reduce the size and scope of government. We're going to have to figure out a way to do so in a way that won't have us revisiting our respective ceilings, cliffs, ultimatums, slashing, cutting, reducing, nearly as often as we currently are - a good amount of which is more political theatrics than fiscal responsibility and is of no value if it ultimately comes down to my this, your that, of which, don't even think about touching my this without first having considered your that of which you feel exactly the same.
debt ceiling???... Managing the country's budget is no more difficult than managing a household budget. The blame rests with the citizens. Our country's debt and spending habits are a mirror image of the average household - In debt up to our eyeballs, living on credit and still spending more than we make. The only difference is that it is against the law for me to print more money when I run out and I don't think that VISA will up my limit when I'm making my payment to them with another credit card that is fastly approaching it's limit. I have only a high school education but could take care of this debt problem in short order. Does it hurt when your broke and can't buy the things you want? Yea! The thing is, sometimes you have to just "eat at home" and the menu is cornbread and pinto beans.
So we don't really go over the cliff, we roll down the hill and there are thorn bushes and some edgy rocks.
One topic I have not heard discussed is what we as the citizens can do about the fiscal cliff. There is something. Go to the source of the problem - our leaders in Congress. They are the ones who have pushed up to and soon to be over the cliff. I say we start a movement to recall congress. They are the ones that created the cliff and now are unable to agree with each other in order to avoid it. Seems to me we need a whole new bunch of leaders that know how to work with each and solve problems constructively. RECALL CONGRESS NOW!
Where was the intense media attention to the "fiscal cliff" during the election when free contraceptives and Romney's dog was the burning issue?!?
The President was re-eelcted and Reid is the majority leader in the US Senate and they both spent trillions with no budget while every proposal the Republican House makes is thwarted. To blame the Congress as a whole is deeply dishonest but maybe that is the idea.
Nice to know that a debt ceiling of 18 trillion is nothing to worry about and we have a declining "slope" in the US economy to look.....forward to. (laugh, chortle, giggle)
At what point does media malpractice take it's blame in the steep decline of our economy and nation?
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