Fiscal
Cliff (idiom):
A metaphorical euphemism to describe the pre-arranged and self-inflicted
punishment that the United States of America will have to undergo at the end of
the current year when the requirements of the 2012 Budget Control Act take
effect; that is, if there is no compromise.
Chances are currently unlikely.
The nation’s lurid phantasmagoria coined the
“fiscal cliff” has had little or no connection in the press to the egregious
effects it will have on the economies of our many states. Sadly, states like Illinois, which already
hold an indisputably uncomfortable fiscal position may be exponentially
affected by the federal government’s inability to find resolution on the
national level. In essence, what is a
currently contrived pension “crisis” in Illinois could become the necessary
scapegoat for a deadbeat state treading water to one facing another national fiscal
tsunami. Given the ethos of our current
General Assembly, this may be an unfortunately forgone conclusion.
States with monetary houses out of order or that
are greatly dependent on federal dollars will be severely impacted by the
fiscal cliff, decline, rut, etc. It makes sense. For example, states that have become very
dependent on excessive or large contracts for national defense spending will
find themselves losing access to vast sums of what had been a normal part of
their yearly GDP (Gross Domestic Product).
While Illinois is not a state so dependent on national defense spending,
other states like Hawaii with a great dependency on such expenditures are
looking at a fiscal chasm if there is no resolution.
The impact of the last Great Recession in
Illinois has left our budgetary house in complete disorder, special thanks to
those in the Illinois state government who earlier avoided making the
necessary and responsible payments to over a million public sector workers
while using their industry as a credit card to seek popular acclaim.
A “fiscal cliff” in 2012-13 can only augment
the fiscal nightmare Illinois now faces.
Because
federal and state finances are often interconnected, the failure to come to
some consensus and instead hold to partisan lines drawn in Washington will
result in significant increases in federal taxes and federal spending cuts to
the states; hence, money lost to the state budgets for services.
Under the Budget Control Act of 2011, when the
“super” committee was unable to find resolution in spending cuts, across the
board spending will take effect on January 2, 2013 – probably one day before a
special session in the General Assembly where pension reform will be a major
topic. Under the Budget Control Act,
everyone from a major company, middle-class family, and a small retail shop
will be affected harshly.
The list is not endless, but the pain will
be. First, federal grants will become
subject to immediate across-the-board cuts.
Note: This will include funding for education
programs, assistance for low-income families (women and children), public
housing, etc.
Even without another almost guaranteed tumble
into recession, the percentages of lost revenues to Illinois are shocking:
Federal Grants at 8.5% of GDP, Federal Defense Grants at 1.5% of GDP, Federal
non-Defense Salaries at 1%, Federal Spending on Salaries, Wages, Procurements
at 2.5% of GDP.
We have a stake at the national level too, my
friends.
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