The Fiscal Cliff and Sequestration: Good Personal Finance

The more I think about the fiscal cliff and sequestration, the more I like it.  It has all the elements of good personal finance:   a strategy for cutting spending, increasing income and a timing to execute.   Personally, I don't agree with some of the elements, but a strategy is better than no strategy, which is how the government has been operating the past 3.5 years.   Here is the strategy and its elements:

Strategy.   If no budget can be passed by Congress, then a set of predetermined spending cuts and tax increases will take place.  I have no reason to believe that Congress will pass a budget before 2013 and therefore.

Spending cuts.  With the exception of Social Security and Medicaid, there will be cuts in all other programs, including defense and Medicare.

Tax increase.  The Bush tax cuts and other tax breaks will expire at the end of 2012.   So there will be a tax increase for just about everybody, including the middle class and the rich.  

Everyone will bear some of the burden of reducing the deficit; everyone will feel some pain.   And everyone will benefit from making these tough choices.


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This is not financial advice. Please consult a professional advisor.

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