People wake up with hangovers on New Year’s Day all the time. This coming year, it looks like we’ll all be waking up with doozy. Due to a confluence of events, taxes are set to rise on all Americans on that date, and automatic spending cuts from the debt ceiling debacle last summer are set to take effect. People are referring to it as Taxmageddon, a whimsical word play on that endearing term from Revelation, Armageddon, the site where the ultimate contest between the forces of good and evil come to do battle. Usually, such hyperbole is just that, hyperbole. In this instance, it’s a rather apt.
This wasn’t planned, as most of politics aren’t. When the President signed the extension of the Bush era tax cuts, he did so knowing that he’d have it handy as a weapon for his reelection campaign. Democrats want to keep in place all of the tax cuts, save for the top tax brackets, a measure that’s expected to cut the deficit several hundred billion dollars over the next decade. The other portion of the fiscal cuts, the sequestration, was a part of the compromise that Republican House members put into place during their negotiations with the White House when the debt ceiling debacle unfolded in the middle of last year. Cuts will be made to defense programs, food stamp programs and federal supports to unemployment insurance.
Here’s the kicker: while all of these measures will indeed put a massive dent in the annual budget deficit, nobody wants them. Not Democrats, not Republicans. In conjunction with an improving economy, and with that, rising tax revenues, the government may be even able to balance the budget at some point in the next decade. Were these changes to take effect and remain in place, it would earn us some breathing space to allow us still more time to figure out our larger budgetary issues.
But not matter how much time we have, we still need to reach a consensus on what it is that the federal government does, and we need the electorate to understand that we can’t have all of the services the Feds offer without the adequate tax structure to pay for it. What’s ultimately missing from the equation is a frank discussion of entitlement programs (Medicaid, Medicare and Social Security). We can cut all we can from discretionary spending, but if that’s the only policy we pursue, in another forty years, the only federal government spending that’ll amount to anything will be on entitlements.
Taxmageddon ain’t pretty. But neither are the alternatives. Until the electorate of this country, along with our policy makers, grow up to realize that we’re doing nothing more than shouting at each other, we may well continue to do so until we sail clear past the point of no return, at which point we’ll be joining Greece on the other side of the financial river Styx.