Parties must solve financial crisis before it’s too late
When Congress passed the Budget Control Act of 2011, it established a conundrum known as the “fiscal cliff,” which ensured that by January the government would finally address U.S. debt and budget concerns with a comprehensive, long-term solution.
The notion of the fiscal cliff relies on recognizing that the combined effects of across-the-board tax increases and dramatic spending cuts could throw the economy back into a recession. This threat would provide enough incentive for Republicans and Democrats to put aside unnecessary partisan agendas and reach a compromise. This type of guarantee was, by design, intended to increase long-term stability in the U.S. economy.
However, with less than a month remaining before the January deadline, and with Republicans and Democrats locked in a congressional stalemate, the fiscal cliff has lost its original intent.
The American people are growing more uncertain as to whether or not a deal can be reached. The longer Congress waits to come to an agreement, and the closer we get to the fiscal cliff, the more their uncertainty will rise.
As lawmakers recognized back in 2011, uncertainty among the American public takes its toll on the economy and Gross Domestic Product (GDP), and the fiscal cliff has exacerbated these effects rather than alleviated them.
In the U.S. stock market, investors are aggressively selling off shares to record as much income as possible before any tax increase is implemented. In October, the Commerce Department reported that while personal income levels have stayed the same, consumer spending decreased by 0.2 percent — the first decline in spending since May.
Many organizations that receive government funding, such as government contractors and nonprofits, are announcing budget and hiring freezes in anticipation of government spending cuts. Since Carnegie Mellon in particular has a relatively small endowment, it depends on funding from granting agencies like the National Science Foundation and the National Institute of Health. At a recent town hall meeting, University President Jared Cohon anticipated that fiscal cliff cuts to these agencies would limit Carnegie Mellon’s research and activities funding.
While we at The Tartan trust that our government will eventually come to an agreement before the deadline, although an agreement may be reached at the last minute as with the Budget Control Act, we urge lawmakers on both sides to balance their party-specific agendas with the consequences of letting the American people grow increasingly uncertain about the fiscal cliff.