fiscal cliff

The Fiscal Cliff: Mommas Said Knock You Out

A mother and her 18-month-old child stand with a health care worker at a clinic in rural Ethiopia. Photo by Cathleen Falsani.

By the time President Obama walked off the stage at Chicago’s McCormick Place after delivering his acceptance speech early Wednesday morning, pundits already were screaming HERE COMES THE FISCAL CLIFF!

And while it might have been a nice idea to take a collective breath after such a divisive election season before new screeching began, the pundits were not wrong.

Be warned: The Fiscal Cliff approaches. On Jan. 2, 2013, to be exact.

Now, I am many things, but an economist (or even a person remotely comfortable with numbers) is not one of them. So let me explain to those of you who are like me, in the simplest terms possible, what this proverbial cliff is all about.

In the wake of the debt ceiling crisis last summer, Congress and President Obama agreed to enter into negotiations to enact a 10-year deficit reduction package in excess of $1.2 trillion.

If an agreement could not be reached, a mandatory, across-the-board reduction in spending (also known as “sequester” or “sequestration”) would occur. All discretionary and entitlement spending -- with a few exceptions -- would be subject to sequestration....

Under sequestration, the U.S. foreign aid that has made such a tremendous difference in Ethiopia and in the lives of countless millions of desperately poor Africans (and others) is in grave jeopardy.

Just the Facts Ma’am: Economic Analysis from the Congressional Research Service

Just the Facts signage, Andy Dean Photography / Shutterstock.com

Just the Facts signage, Andy Dean Photography / Shutterstock.com

When we listen to political debates about which public policies will strengthen the economy, it is easy to get lost in a statistical maze. Each side presents economic data in a way that supports their own theory of the case.

The Congressional Research Service (CRS) is a branch of the Library of Congress that can help us make our own assessments regarding public policy. According to the CRS website, its purpose is to provide “authoritative, confidential, objective and nonpartisan” analyses to members of Congress. 

The relationship between tax rates and the economy is an issue in the current campaign. Thinking about this issue, the CRS looks at empirical data that may or may not confirm theoretical models or ideological assumptions. Thus, like the early TV detective Joe Friday, they want “just the facts ma’am,” and then they try to reach conclusion from these facts.

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