OPINION: ‘Fiscal Cliff’ Portends Higher Taxes, Fewer Jobs

By  //  December 31, 2012

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BREVARD COUNTY • COCOA, FLORIDA–I was having a conversation with a client recently about the so-called “fiscal cliff,” and here is a thought I shared with them.   I’d love to know if others agree.

My thought is based on this assumption:  If I buy something from you, and then you buy something from me, other than the taxes we pay to the government, there is no real growth in the economy even though both those transactions are counted as part of Gross Domestic Product (GDP).

Further, I assume the only real ways to expand our economy are to export products made in the U.S., to have people from outside the U.S. come and spend their money here, or to create money out of thin air (as the Fed has done and continues to do).

The net result, if we go over the “fiscal cliff,” is that money that otherwise might have been spent or invested by those who actually earned it will instead be spent by politicians who have the power to pass laws to steal it and give that money to someone else.  In the hands of the earner there is a chance for that money to not only generate income, but create wealth that produces both ongoing income and potentially grows the economy.  In the hands of politicians, it provides income to favored groups and the non-productive, but seldom helps to truly grow our economy.

The $100 billion in proposed sequestration cuts in government spending is only 3% of the budget, and about the same amount that the treasury borrowed from the Chinese and others to replace what was lost from the 2% payroll tax cut.

Beyond those cuts, the only difference if tax rates are increased on the most productive is that jobs they might provide will be gone and those the government pays for will be increased.

The only real damage is that with more money being spent by the government, odds are that exports will drop, new money coming into America will be cut, and the overall drop in economic growth will result in even fewer jobs or lower income for the very middle class that Obama claims to want to help.

ABOUT THE AUTHOR

Ilene Davis

Ilene Davis, a resident of Brevard County since 1971, is a Certified Financial Planner with a bachelors degree in Mathematics from the University of Michigan, a bachelors degree in Accounting from Rollins College, and a Masters in Business Administration from Webster University.  Ms. Davis became a stockbroker in 1982, earned her designation as a Certified Financial Planner in 1984, and with a desire to serve clients more on her own terms, opened her own financial consultant office in Cocoa Village in 1986.   She is committed to helping each client create their own “Financial Freedom Fund,” and believes strongly in free market capitalism and a “hand up rather than a hand-out” as the best path to prosperity.

 

 


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