Fiscal cliff - part 2

Part two of the fiscal cliff. After my previous article on this subject, a small deal was reached and for a short period the American budget was saved. However, the short period (about 2 months) is over and a new deal has not been reached. Therefore, on March 1 the President had to sign into effect budget cuts as the law forced him to do, known as the sequester.

Who will be affected? About half the budget cuts concern the military. Some will claim this is a good thing as too much is spend on the army, and indeed this would be great if done in a controlled way but not due to artificial budget cuts as than chaos can erupt. It seems those working for defence contractors are already feeling the effect as some companies are already reducing their workforce. Further, at a moment when it seems the number of conflicts increase the army should be prepared. Although, maybe there will be less interferences in local conflicts and thus people may become less frustrated because of foreign interference although others may become frustrated by the lack of help.

Social services may run out of money, such as those providing (safe) sex advice to youngsters but also other health organisations may suffer. Also research will receive less money, including into diseases or agriculture but maybe also into climate change. Of course, the wealthy will not feel the impact immediately because they can afford private hospitals who use the money of their clients to employ staff and thus the rich will not understand why people become angry as life continues as before. Unless they get a currently untreatable disease while funding for a cure was stopped. Or companies of wealthy may go bankrupt due to a shortage of clients and then they have to seek aid from the underfunded public sector.

Also "bureaucracy" (i.e. civil servants) will be hit as there will be less money to pay them and thus life becomes more difficult. For instance, the Federal Aviation Authority made public it will have to close a number of air traffic control towers. Further, there may be too little money to re-employ some teachers next year.  Here the wealthy may feel some cuts immediately, not their children as those are send to private schools who use parent's money to employ staff, but because planes will remain longer on halt before flying. Of course, then they can blame lazy people who don't want to work as hard as they do. Also control agencies may receive less money, good if you want to cheat but a disaster when e.g. food is not properly controlled. Although, there is nothing against a government that runs smoothly and thus may need some reforms.

And thus Congress blames the President for not reaching a deal while President Obama claims he has a moral right to demand Congress accepts many of his suggestions because he won the presidential elections while the Republican candidate lost. Some commentators think that the President assumes that if the economy may slowdown due to the cuts, the Republicans will start talking again and accepting some of his proposals. However, he may be wrong.

Indeed, Republicans (and even worse Tea Party members of whom some are elected) demand tough reductions in the budget, and the above mentioned cuts are the kind they demand. Indeed, Republicans want to reduce government (i.e. number of civil servants). They find everyone should work for their money (as the rich do) and not get things for free and thus if social services are destroyed because of budget cuts than they get what they want. Republicans argue against defence cuts while there should be even more cuts in social programs. Some really believe that tax reductions are the way to stimulate the economy (and they can be if everyone can profit) but many simply don't want to share and want to keep their own tax reductions.

Therefore, President Obama should understand his opponents very well (and he probably does as he dined with some Republicans who he thinks may want to reach a deal). His opponents want to prevent the Democrats winning the next election and thus they try to block everything they disagree on in the hope the President, and thus the Democrats, will be blamed for all that goes wrong.

I think President Obama should not claim he has the moral right to demand Congress accepts many of his ideas after winning the presidential election because his opponents in Congress can equally claim people gave them the moral right to vote as they do. He should indeed accept that Congress can decide what is right for them. In addition, when people are loosing their job because no deal was reached they have no message on his moral right and only judge him on what he can do.

The President however should inform the people (as he does) about the reasons why he refused a deal with the Republicans, why he thinks it was better to have no deal than have a deal. He should tell he didn't block a deal to oppose the Republicans but because he believes their ideas are bad while he has better ideas that are good for the people and the economy. And in his beautiful State of the Union he demonstrated he has ideas. He should also explain it politely or they will shout he is a dictator who tries to enforce his will upon them. Because President Obama should remember that, as a president, he will receive the first blame for not being able to reach a deal, certainly when people start loosing their job or can no longer afford going to the doctor after parts of the public sector stops working. Therefore, he should do everything in his powers to reach a deal as soon as possible before the next deadline of 27 March when an agreement on this years budget should be reached.

Maybe he can agree to more private sector (hospitals, schools, transport, ...) as indeed many people want to help others as a self-employed person. However, this can only on condition there will be a maximum cap on the costs for people using them (but not in % of their income because than sectors will mainly deal with the highest earners to have the largest gain) while minimum wages per hour in these sectors should be agreed. Then doctors, nurses, teachers, ... can be paid and have jobs while most people will be able to afford those services (on condition they have an income, including benefits if necessary). And as these sectors have to pay a minimum wage per hour (plus for schools maximum classes), the employers will employ more staff as that will be as expensive as forcing employees to work longer hours while services will be better and thus more clients. As most of these services are no longer paid by government, taxes can decrease. Still, help for the very poor will always be necessary because it shouldn't be that children can't study because their parents can't afford it and thus in adult life will remain poor as their education was too poor to find a well-paid job. Or parents with a disabled child should receive extra help to ensure their child can study without the problem that the extra cost of caring forces parents into poverty. This may be a compromise: more private sector, less government (good for Republicans) while more people at work and the social sector doesn't become too expensive (good for Democrats). But I think I simply describe the American system as it already exists, and thus something else is wrong: the wealthy who avoid paying taxes.

Thus, the above probably doesn't go far enough for many Republicans who find everyone should be able to pay for e.g. the education of their own children or receive punishment for not looking after their children. Or services are punished for providing bad services while denying them money. On the other hand, in the longer term it may become a society where no-one pays for services that advance others (e.g. taxes for education) except their own family. I think that is not a good society but maybe this is the way societies are evolving: me, myself and I. (Recently an angry woman told a journalist she didn't agree that the government wanted to cut her child benefits because she earned £100,000 while poorer families would continue receiving money for which she had to pay via taxes. I thought, earning about 4-times less with no children, why should I than pay money for families with children, their child benefits and education if they don't even want to help each other? I thought, because children are our future and need our help and shared help is less expensive. But certainly the UK is heading towards a society where everything is private in order to be able to reduce taxes, including the much beloved NHS. And while the private sector can also do many good things for people, one needs to be careful it will not only do good for the money as than mainly the rich will benefit). Of course, society will need to continue checking the quality of the services provided, while regional governments can decide to deliver public services or not.

The President called in his State of the Union for a smarter rather than bigger government for the many, and not just the few. He also talks about free enterprise and individual initiative. Indeed, government should check whether everyone acts according to the same rules. It cannot be that some reduce their taxes and use that money in an unfair advantage with their competitors, and as a result tax evasion becomes the standard to have a good running economy because that will always get stuck. Therefore, the president is right when he wants to get rid of tax loopholes and deductions. Indeed, the wealthy are against this because this would raise their taxes although it would reduce the taxes for ordinary people. He also says that deficit reduction is not enough but that the economy also needs stimulation. Indeed, (research into) new technologies need financial support until it becomes viable and starts earning money.

Thus the ideas of the President make good sense. Nevertheless, many in the Republican party are vengeful because they lost the election while they were convinced they would win. By trying to damage the President and blaming him for all wrongs they probably hope to win the next election. And if not, at least the people are punished for their wrong vote.

And thus President Obama will have to continue fighting his case by continuing telling the people about his plans, by publishing them on the Internet so everyone can read them (and make some suggestions) and placing them against the proposals of his opponents while not only pointing to their bad but also their good ideas. By explaining why he thinks it was better no deal was reached than a bad deal that would make it all much worse.

Thus, what would I say if I was an adviser to the President (which I am not)?

I would advice (as the President intends doing) to continue talking with members of Congress to try to reach an agreement. But I would advice against abandoning reason and allow big cuts for the poor and more tax reductions for the rich. I would advice to defend what he believes is right. Of course, this can only be done when there is a plan, and after reading the State of the Union I think the President has good ideas. He already intends to travel his country explaining what he finds necessary.
If the President really thinks the ideas of his opponents are bad, than I would advice to stick to his plans until the next Congressional elections (although of course he should adjust them whenever possible to integrate other good ideas if that allows a deal). He should inform the public about his ideas and that although he can change them to some levels, he believes his ideas are the right ideas while the others will make it worse. He may even inform the people he will "fight" for these ideas but can only do that with their help and that means a majority in Parliament.
In the meanwhile, although Democrats can discuss plans and have ideas, the President should get ride of all opponents of his plans in his own party (although I think parties should no longer exist but they do). This is not dictatorial as members can join discussions planning the ideas but ones the party agrees to some plan, people can choose to join the other party if they don't support the ideas, otherwise they have to be loyal to what has been agreed within the party. But I admit this may and probably will be considered as proof that the president is a dictator. But, one cannot allow the enemy within its own party. During Congressional elections, the Americans can choose which plan they find best. If the Democrats win, President Obama needs to be sure all Democrats will vote for his plans; when some may vote against their own president he can't be sure his plan will be accepted. But I realise another two year of deadlock may be deadly for the Democrats (maybe he should call for new elections).
If the majority of the people choose again for a Republican majority in Congress, then there are two possibilities (as discussed before): (1) he still believes the Republican plan is wrong and he resigns so a new president can be chosen (on condition the Vice-President also refuses Office) who agrees with the Republicans ideas or (2) the President can drop most of his own ideas and accepts the majority of the citizens favoured the ideas of the Republicans and the standstill comes to an end. In both cases the president should not feel guilty as he allowed the people the choice while voters should not complain as they were allowed to choose. A third option is to stay in the job but still refuse to sign any deal. This would be against the wishes of the majority of the people as they voted Republican and as no deal is reached, it probably will destroy his own party during a next election as nothing moved and everyone became frustrated. And there is nothing wrong with resigning when one believes the ideas of others are wrong: in Europe quite often governments fall, allowing citizens to select the direction they prefer.

As predicted, a final agreement on the budget couldn't be reached, and thus cuts came into action that may damage the economy, and as a consequence the economy in the rest of the world. It may also damage the President and his party as people who become desperate stop thinking logically and start blaming the most visible person. And certainly when the rich will feed the poor via their private (often religious) organisations, then they can show government is bad as it can no longer help those in need while private is good, vote for us. Ones in power, the need to feed the poor will disappear so they will become even poorer while the rich can keep the money for themselves. But maybe I read too many of their ideas and it all will be different from what I described above. Maybe I should be less cynical.

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