Will we jump from the cliff? Congress and the president will determine whether we fall, jump, or back away from the cliff. While I trust they will get together and make the right decision, I think we should be prepared for the worst case scenario.
How do we prepare? First of all, learn what the fiscal cliff and its implications are for your personal economy. Too often we put ourselves in a position of having to react to things that have taken place while we were sleep, literally and figuratively. We had better stay awake on this one, folks.
In general, the fiscal cliff refers to $7 trillion in tax increases and spending cuts that will take place on January 1, 2013. For most of us, on a personal level, it means that we can say, Adios, Sayonara, Cheerio, Ciao, and Goodbye to that increase in take home pay, called the Obama payroll-tax holiday, we have been enjoying for the past year or so.
Smaller paycheck coming
Most workers would see a 2 percent tax increase instead because the “holiday” was at the expense of the Social Security tax.
The broader impact on the economy would be dire as well. The Congressional Budget Office (CBO) estimates it would cut gross domestic product (GDP) by four percentage points in 2013, sending the economy into a recession. It also predicts unemployment would rise to 9 percent with a loss of 2 million jobs. Neither individual workers nor the economy as a whole can absorb that kind of hit.
With a little less than two months to prepare, you probably should be doing what the big corporations have been doing for a while now: Holding on to your cash. They have also been converting their financial instruments to cash. Have you checked out the stock market for the past few days? If the big boys and girls are scared of falling off the fiscal cliff, what should our position be?
They are refusing to spend or invest or lend that money until they feel comfortable. We are complaining about it but that will not get them to release their money back into the marketplace. We complain; they retain. Our position should mimic theirs.
Time to be producers
While I sincerely do not believe the boys and girls in Washington will allow us to fall, jump, or be pushed off the fiscal cliff, I do believe that whatever they decide and agree upon will hurt those at the bottom tier of the economy. Whether it’s a regressive gasoline tax, the elimination of tax deductions such as home mortgage, medical, and contributions, or whether they choose to put an end to cost of living increases for social security recipients, folks at the bottom will be negatively impacted the most.
No, it’s not fair. No, it’s not the right thing to do. No, it’s not moral. But, after all, it is always about the money, and you know who wins that fight.
So until Black people learn how to refrain from being the best consumers in the entire world, and produce goods and services to a much greater degree than we do now, we had better learn how to respond appropriately to national and international fiscal issues.
Keep your money in your pocket, the same way big corps are keeping their cash on the sideline, and hold it until you see what direction this nation will be taken by those in charge of it.
Jim Clingman, founder of the Greater Cincinnati African American Chamber of Commerce, is the nation’s most prolific writer on economic empowerment for Black people. He can be reached through his website, blackonomics.com.