The United States is quickly racking up a huge national debt. Currently we owe $16 trillion, and if the U.S. continues with its current spending habits, we will owe $22 trillion by 2016. Clearly, this is a problem that needs to be addressed, and soon. Fortunately it is (in a way), as Congress has passed the Budget Control Act of 2011, which has created something known as the “Fiscal Cliff.” This Act isn’t so much of a solution, as it is an ultimatum: Congress must either find a way to lower the deficit, or it will be automatically lowered through forced budget cuts and increased taxes. Right now, the U.S. is set to go over this cliff early in January of 2013, which isn’t too far off. So, what’s to be done?
The Congressional Budget Office (CBO) predicts two possible outcomes for the cliff. The U.S. will either have a low deficit and reduced debt, along with higher taxes and lower spending; or the alternative, which is a large deficit and debt with lower taxes and higher spending. If nothing is done, the former scenario is most likely. While this solves much of the debt and deficit problems, it will be painful for the American people. Most will suffer from tax hikes, programs such as Welfare and Medicare will have slashed budgets, and the economy will surely sag. Fortunately, the CBO predicts that this would only be the case until 2022, and then United States would be free of most of its debt.
The alternative to this, as strange as it sounds, could be even worse. It would first require Congress and the President to take action, and then it would require the two parties to work together on something. As crazy as this sounds, it is a possibility, and if by some chance it happened, we might then avoid the fiscal cliff. This would entail doing pretty much what we were doing before: the Bush tax cuts would be extended, Medicare would continue at its current rates, and the public debt would continue to grow. The only major difference would be that the debt ceiling would be increased to allow for more borrowing. This isn’t much of a solution, as it only prolongs collection day; the only way it’s better than going over the cliff is that it would lessen the likelihood of an economic crash.
Hopefully, Congress has the sense to create a real solution to the cliff, but most likely they’ll just continue with what they’ve been doing, business as usual. It seems like going over the cliff just might be our best option.