After reading the article “Going over the fiscal cliff would
give US an austerity crisis, not a debt crisis” I was able to apply concepts
that have been covered in class. The
article talked about how the country faces more than half a trillion dollars in
tax increases and spending cuts next year, starting in January. With the intent to increase taxes and cut
spending, workers would have less money to take home from their pay checks,
this would cause GDP to decrease, which would put our economy into this “financial
obstacle course” that economist believe our country is facing. With workers having less money in their
pockets to spend and help raise GDP, our country is more than likely going to
go back into a recession. I feel that
this is necessary to try to get the country out of the debt that is it
currently in though. Even though
families will be paying more in taxes, in the short run it will hurt the
economy, but the country always ends up getting out the horrible situation like
it has been in before. Congress says
that under the current laws that are in place, there will be massive spending
cuts and major tax increase for 2013. If
we consider all the effects of government debt on the economy, a large public
debt is likely to reduce long-run economic growth; which we are facing
today. We can see that the long run of
high spending and low tax rates have depressed the growth rate of the
economy. As we have had lower tax rate,
this has caused a decrease in public saving.
Since there are low savings, this has caused investments to decline as
well. There needs to be a change in
fiscal monetary policy in order for aggregate demand to remain constant. As our economy is fragile at this time we
could not handle the large tax increases without falling into a recession. As the fiscal cliff sounds much more
intimidating than an economic obstacle course, if our economy can slide down,
our economy will eventually be able to climb back up. There need to b changes in our economy in
order for our economy to ever grow again.
The leaders need to face economic reality and tackle the debt that we
are in today. It is important that they
act upon this issue in order to get our country at a growth rate again. Our economy needs to invest money into our
own economy in order for it to continue to grow. Yes sending jobs, etc to China is cheaper but
it’s causing a lot of American’s to be without jobs which is playing a huge
hurt role on our economy. We live in an
economy where individuals are scared to invest money because they are not sure
from day to day if they will have a job the next day. Congress needs to get our country back on
track, it will take another recession to get our economy back on its feet, but
it is a decision that needs to be made before our country continues to grow in
more debt.
Kayla Janney
