Election 2012: The Day After the Debate

Oct. 4, 2012
Decision time approaches for fiscal budget reform.

Wednesday night’s presidential debate provides a lot of fodder for Thursday discussions. It was certainly interesting no matter your political persuasion. We should all keep in mind that as powerful as the president is, economic power largely resides with both chambers of the U.S. Congress; Congress has to decide what they are going to do about the fiscal cliff and the taxes we pay. 

There has been a spate of articles addressing what Congress might do. A brief synopsis includes: doing nothing, “kicking the can down the road,” or act in a manner that promotes a long-term solution. 

Doing nothing would be a terrible idea and is only likely to happen if partisan politics creates an unbreakable gridlock. The result would be an immense tax hike that negatively affects consumer spending in 2013, and contributes to a recession in 2014. Flow through businesses would also be negatively impacted, hurting job creation and economic growth.

A “kick the can down the road” action (providing short-term resolution that pushes off real reform to years later) is entirely possible. Taxes might go up on high-income earners but everything else, including sequestering, would be deferred for further study. This would keep the uncertainty that has plagued capital expenditure decisions in place, but the downside impact would not be as bad as doing nothing.

Decisions by Congress that attempt a long-term solution sound like the best idea, but remember that with these decrees, there will always be consequences. A long-term resolution needs to include reduction in federal spending and a mechanism for increasing federal revenue. Both help resolve fiscal issues, but each would slow economic performance when implemented. In fact, enough austerity to remove the budget deficit in the next decade would likely result in steep recession in the U.S. Therefore, while this type of action would stabilize U.S. fiscal spending for the long-term, the steps to achieve this goal are painful. 

There are no easy answers, even though either presidential candidate might say otherwise. Austerity is painful, free spending is deadly. Those are the two choices.  

Popular Sponsored Recommendations

Global Supply Chain Readiness Report: The Pandemic and Beyond

Sept. 23, 2022
Jabil and IndustryWeek look into how manufacturers are responding to supply chain woes.

Empowering the Modern Workforce: The Power of Connected Worker Technologies

March 1, 2024
Explore real-world strategies to boost worker safety, collaboration, training, and productivity in manufacturing. Emphasizing Industry 4.0, we'll discuss digitalization and automation...

How Manufacturers Can Optimize Operations with Weather Intelligence

Nov. 2, 2023
The bad news? Severe weather has emerged as one of the biggest threats to continuity and safety in manufacturing. The good news? The intelligence solutions that build weather ...

How Organizations Connect and Engage with Frontline Workers

June 14, 2023
Nearly 80% of the 2.7 billion workers across manufacturing, construction, healthcare, transportation, agriculture, hospitality, and education are frontline. Learn best practices...

Voice your opinion!

To join the conversation, and become an exclusive member of IndustryWeek, create an account today!