Wednesday, September 19, 2012

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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