Fiscal Cliff, Debt Ceiling, Balanced Budget, Oh My!

by Erica Szpynda

Widener University Economics Major

It is the beginning of the month and your bills are starting to pile on the table.  You have every intention to pay them, but your money is tight.  If you end of not paying a few of those bills, what happens?

Well, the utilities have been used and the goods and services, bought on credit, have been received.  This is the same as what the government was up against, until Wednesday. The House decided to temporally raise the debt ceiling to cover the bills the United States has accumulated.

Everyone in Congress knew that if the US defaulted, for the first time in history, it could bring detrimental hits to their credit rating and have the possibility of sending the world into a depression.  Bringing a sigh of relief, Republicans backed down on their demand that they would only raise the debt ceiling if spending cuts were taken in the same amount.

Nevertheless, in less than four short months, Congress will still have to decide on spending cuts and rising taxes. This is the true debate that is splitting the nation, not just elected officials.  We have moved past the fiscal cliff raising taxes across the board and Americans will have less money in their pockets.  It is agreed that spending cuts need to happen at some level, but do we raise taxes again?

We just need to remember two simple formulas:

1.       Revenues = Spending (Balanced Budget)

2.       GDP = Investment +Consumption + Net Exports + GOVERNMENT SPENDING

With these in mind, remember we are still recovering from a recession and how much should we decrease an important variable?

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