PF Blog

Optimism and the “Fiscal Cliff”

By: Bill Wood, MoldMaking Technology's Economics Editor
16. November 2012

I have been conducting a survey of North American moldmakers for more than 15 years. And based on their answers, it is resoundingly clear that moldmakers, almost all of whom qualify as small businesses, are increasingly unhappy with the federal government. To a person, I have found moldmakers to be independent, industrious, patriotic, and generous within their communities. And all of this is true despite the fact that their industry has been under severe stress for more than a generation. But their understandable pessimism notwithstanding, I have become increasingly optimistic about the situation with “the fiscal cliff.”

Now before you start thinking that I am smoking too much of that newly-legalized, medicinal marijuana, allow me to tell you why I say this. It is because we are finally past the election. There are now no more excuses. No more trying to get somebody else elected. No more waiting for the American people to have their say. No more politicking. Due largely to Congress’ ineptitude, we are now confronted by clear and present problem.  And it is a problem that will hurt all Americans (not just Democrats or just Republicans) if it is not solved. In other words, Congress and the President finally have no other choice than to act appropriately. Now, just maybe, they can get something done that is productive.

It will be difficult to work out all of the details, but most of the groundwork has already been laid. The Simpson-Bowles proposal pretty much got it right. And so did the Gang of Six. We have to cut spending and raise revenues. Nobody really disagrees with this. The hard part for the politicians on both sides of the aisle has always been finding the courage to concede and compromise. But now that the election is over, that problem no longer exists. The one thing that the American voters strongly agree on is that they want this problem solved, and they want it solved now.

I have long believed that most Americans in the upper income brackets would be more than willing to pay more taxes if they could be convinced that the money was not being wasted by the government. Likewise, I have always believed that most Americans in the middle and lower income brackets would go along with entitlement reform if it meant there would be less waste and less debt passed on to future generations. The common ground here is that the vast majority of Americans are willing to do what is best for the country.

And the good news is that doing what is good for the country will also help most Americans in the short-term. If Congress can solve this problem, it will go a long way towards restoring the confidence of voters and consumers and business leaders. The cuts in government spending will then be more than mitigated by the increase in economic activity and jobs. And the increase in taxes will also be more than offset by the rise in economic activity and profits. In other words, the resulting rise in economic activity will help all Americans prosper. It  might even be so beneficial that it could raise the approval rating of Congress.


 

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