To combat peer pressure and highlight the lack of wisdom, sometimes manifest in an adolescent-group setting, some parents have resorted to questioning their children about the likelihood of jumping off a cliff just because their friends were doing so.
Perhaps it is time for these children to turn the tables on their parents and ask why, as voters and constituents, these same parents are allowing their elected officials to lead the whole lot of us off a fiscal cliff.
In the current environment, the fiscal cliff is comprised of increasing taxes and a reduction in government spending. If enacted, certain automatic spending cuts will be triggered. At the same time, an existing payroll tax holiday will expire.
Additionally, certain tax cuts from the George W. Bush administration will also expire. The combination of these factors is generally forecast to be very detrimental to the U.S. economy. A recent economic report from Goldman Sachs estimated gross domestic product could decrease by 4 percent in the first half of 2013 if nothing is done to diminish the severity of the fiscal cliff.
With a real cliff, there are only two options: jump or don't jump. Fortunately with the existing fiscal cliff, a range of potential outcomes is possible.
If nothing is done in the interim, the fiscal cliff will occur around the end of the year. Various long- or short-term solutions are available to delay the arrival of the fiscal cliff. Additionally, a wide range of compromises, on both the spending and taxation aspects of the fiscal cliff, can be explored. Mitigation of the potential negative effects of the upcoming fiscal cliff can be accomplished in many forms.
Federal Reserve officials have publicly stated the fiscal cliff could be as big a threat to the U.S. as the downward economic spiral in Europe. Ben Bernanke, Federal Reserve chairman, has warned the size of the fiscal cliff is so large there is no way the Fed can offset the negative effects on the U.S. economy.
Given the wide range of uncertainties already visible in the U.S. — including unemployment persistently over 8 percent, continued general weakness in the housing markets and slowing with significant international trading partners — any precipitous fall off the fiscal cliff will result in significant damage to the health of the economy.
Kirby Brown is the CEO of Beneficial Financial Group in Salt Lake City.