The legislation that kept the United States from going over the fiscal cliff was fool’s gold for anyone who thought it would help American businesses and the 12 million people standing in the unemployment line.
On the one hand, the bill provides an additional 28 weeks of unemployment compensation from the federal government, and money in the pocket is always a good thing, so hooray for the unemployed.
On the other hand, the fiscal cliff legislation didn’t solve the problem it was supposed to, namely how to reduce the federal deficit, and that’s a bad thing for businesses.
The deficit is a parachute drag on the U.S. economy, allowing it to inch forward – growth was 2 percent in 2012 and is projected to be that again this year – but holding it back from making the substantial gains needed to reduce unemployment.
The federal deficit is $16.4 trillion, which coincidentally happens to be the nation’s debt ceiling, the maximum amount of money the United States can borrow to pay its bills.
Past Due On Debt Ceiling
The federal government technically reached the debt ceiling on Dec. 31, but Treasury Secretary Timothy Geithner said his department took some “extraordinary measures” that allowed them to keep the government afloat until Feb. 28.
Businesses justifiably get nervous anytime the government takes “extraordinary measures,” especially when those extraordinary measures do not solve a problem. And make no mistake about it, the finagling by Geithner’s accountants did not solve the problem. They just delayed it.
Now, it’s back in the laps of Congress and President Obama and we know how good those two are about meeting deadlines. They first started squabbling about the debt ceiling in the summer of 2011. They agreed that we needed to cut $4 trillion from the deficit over the next 10 years, but that was the only thing they agreed on.
When it became obvious neither side would budge, they came up with a wild scheme of mandatory spending cuts and steep tax hikes to force a solution. This was what we called the fiscal cliff. Congress gave itself 17 months to avoid this undesirable ending and couldn’t do it.
The bill Congress produced, and Obama signed, not only won’t cut $4 trillion over the next 10 years, it will ADD $4 trillion over the next decade, according to the nonpartisan Congressional Budget Office.
Can You Give Us A Plan?
So now what are American businesses supposed to do? They have been hording cash for two years, waiting for a clear plan from the government on dealing with the debt ceiling to stabilize the U.S. economy and what do they get? A patchwork plan that sets a new deadline for solving the crisis.
So businesses respond by sitting on the $1.7 trillion pile of cash they’ve been hoarding, waiting for a clear signal that the government knows what it is doing and where it’s going.
And 12 million Americans stand in the unemployment line waiting for businesses to hire them. Good thing they got an extra 28 weeks of unemployment checks. They’re going to need ’em.