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Fiscal Cliffs, Lame Ducks & the Grand Bargain

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Now that the election is over, you are probably starting to hear all sorts of news reports about lame ducks, fiscal cliffs and a “grand bargain.” Normally we steer clear of insider terms, but these are things you really do need to know about, because you could feel the impact.

Lame Duck:   An elected official who is still in office after his/her successor
                       has been elected.

The terms of our elected officials end when the new elected officials terms begin, usually sometime in January.  That leaves a period of time between the November election and when the new person takes office in January.  During this time, an elected official is called a “Lame Duck.”  Lame Ducks are free agents, making decisions without worrying about party politics, threats from their leaders, or voters. 

Congress has some work to do before the end of the year (which you’ll read about next), so it will come back in a “lame duck session.”  That is simply a session held between Election Day and when the new Congress takes office.   Those not re-elected don’t feel the pressure of voters and special interest groups, so they can be unpredictable.

Fiscal Cliff:    The deadline Congress set for itself to find a compromise on
                        government spending.
          

One of the best explanations of the "fiscal cliff" comes from National Public Radio (11/8/2011 Morning Edition).  Here is an excerpt from that broadcast:

Speaking of the fiscal cliff, let's take a minute to review what it is and how it all began. Imagine yourself standing on top of a cliff and it’s December 31st, New Year's Eve and you're looking down, way down, toward New Year's Day. That's the deadline, the day a lot of fiscal policy will change and nearly all of us will feel it unless Congress acts.

Congress, along with the White House, set that deadline to resolve the long nasty fight over (the budget) back in the summer of 2011. Our political leaders thought it would be a good idea...to create an incentive for compromise. So they established automatic cuts and tax (increases) that would take effect on January 1st, 2013, the fiscal cliff.

But no compromise has (been reached), so here we are in November headed toward that fiscal cliff. If Congress does not act before the end of the year there will be across the board cuts in spending to everything but entitlements. That means education, defense, food stamps, national parks, you name it. And there's the other side of the package, the Bush era tax cuts expire, so taxes will go up.

And the cliff gets even higher when you add in the fact that some stimulus measures are expiring January 1st, including the payroll tax holiday and extended unemployment benefits. So both consumers and the government are going to have a lot less to spend if we go over that cliff and that could push the economy back into recession.

You see, Congress has been spending more money than it takes in, borrowing money to make up the difference.  That is our federal deficit – the difference between the money we have, and the money we spend.  We now owe over $1 trillion dollars, and we keep spending.  So Congress set this deadline, the fiscal cliff, and if we don’t find a way to cut spending or bring in more money, we’ll go over the cliff.   Then everyone will feel the cuts, which the Congressional Budget Office reports would send the economy back into recession and increase unemployment to over 9%. 

Grand Bargain:   An agreement President Obama and Speaker of the
                             House John Boehner are working on to keep the country
                             from falling off the fiscal cliff.     

Most believe that the agreement will have to include some tax increases and lots of cuts to mandatory programs (including things like Medicare, Medicaid and Social Security) in order to cut the deficit significantly over the next ten years. 

Federal spending affects us all, through roads being fixed to school lunches being available to our social security checks and tax returns coming on time.  You can, and SHOULD, tell your federal representatives what you want them to consider when balancing the federal budget.  

You should contact Sen. Grassley, Sen. Harkin, and your US Representative.  You can find contact information for Iowa’s congressional delegation here.

  • Where do you want to see Congress cut spending? 
  • Where should they avoid cutting? 
  • Should they balance the budget with tax increases, cuts in spending, or a combination of both?

We’ll keep you updated on the ongoing talks during this two-month “lame duck session” – so watch our website alerts and Facebook.