So what the heck is a “fiscal cliff”?
December 24, 2012
by Brian Wolf

These days, you can’t go to any financial website without seeing headlines plastered throughout discussing the fiscal cliff. The markets are in fiscal cliff frenzy.

If you are into all the gory details about what it is and what might happen, you are welcome to spend some time on www.cnbc.com and you will learn more than you probably ever wanted to on this topic. But for today, I thought I would bring it all down to some simple facts.

Making the fiscal cliff simple

What’s really happening here is that our government is a lot like a household who has run up an enormous amount of debt on their VISA and MasterCard. And they are starting to realize that they aren’t making enough money to pay for all the stuff they’ve bought. Does this sound familiar?

While most of the headlines discuss the national debt, and sometimes they will bring up social security, the reality is that neither of these items are the major issue. The big problem is Medicare.

If you go to www.usdebtclock.org, you will see what I’m talking about. At the bottom of the page, this site lists how much our government has spent on the three promises of social security, prescription drugs, and Medicare. The numbers represent how much they have yet to earn (collect in tax from you and I) to pay for what they’ve promised.

The combined number is over $100 trillion, and that doesn’t even include the national debt. Such a large number like that is very hard for people to really grasp what it means. So, the good folks at www.usdebtclock.org have figured out a nice way to make that number more real.

In the bottom right-hand corner of the site, they tell you how much tax the government will need to collect per taxpayer (that means per household) to pay for just those three promises. The staggering number is over $1,000,000 per taxpayer!

This is equivalent to a slap in your face and mine. Our government knows it has no chance of fulfilling these promises, much less balancing the budget. And that’s how they got to where they are today.

Jan. 1, without taking action, they will be forced to start taxing us more and spend less. While most politicians can live with the taxing us more side, spending less has them in a panic. It seems to be ingrained in a politician’s nature to spend money they don’t have.

You should expect some type of “deal,” and you should also expect that any “deal” is bad news for you and I. A “deal” is likely to be nothing more than the politicians finding new ways to kick the can down the road. They don’t want to deal with reality until it blows up in their faces.

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