Fiscal Cliff — a poor term for a good event

Many recent press articles have used the term ‘fiscal cliff’ to describe the December 2012 budget events of tax increases and government spending cuts.   Such a description is biased and underlies the author’s inherent priority of economic activity over fiscal health.  Worse in many readers minds, I fear, the act of saving is demonized as the cause of poor economic activity.  Nothing could be further from the truth.

Good fiscal health, debt relative to the future capacity to payback, is a prudent state of existence for nations, corporations, and individuals.  Of course there are many ways to judge good when measuring fiscal health, but multitude of measurements do not detract from the desired state.  And yes, spending is a measure of economic activity.  However, too many layman have misjudged the cause of economic activity.   Spending is a convenient measure, but it is not a cause of activity it is the result.  To grow economic activity one has to demonstrate value to another party that results in spending.   Thus, lack of spending as measure by economic activity has at least three logical explanations:

  • Lack of money
  • Lack of people or entities
  • Lack of valuable offerings

In the short term, the number of people or entities is relatively constant, but over the course of year, or a president’s term, the number of people and entities definitely trend down and up and cause a change in economic activity.  Reporters show a lack of comprehension when they omit this factor in their stories focusing on cause of change in economic activity.  Additionally, reporters too often take for granted that valuable offerings are made when they report that the economy would be better if people would just spend their money.  Through the natural course of economic activity, hearing “no I don’t want to buy your offer” causes individuals and companies to reassess and make improvements.  And this is a good process.

By most people’s feeling, the United States government has an unhealthy balance sheet because spending in the Bush Administration and Obama Administration has far outpaced the tax collections of the economy.  Neither president did a good job of informing the citizens that they will have to pay for the expenditures made, and that is simply poor leadership.  But leadership quality aside, pay, we the citizens, must.  Our congress has through several steps left us with a method of payment, which arrives December 2012.  It’s good that we will slow deficit spending.  I wish we were not only eliminating deficits, but also reducing total debt, but the initial step is one I appreciate.   The fact that our economy is not at the point of strength necessary to make repayment easier, is simply a fact.  Poor economic activity is not an excuse for meeting responsibilities.  And, I argue, maintaining good fiscal health is a responsibility.

The call to action for Americans should be for the reassessment of their recent activity and inability to make enough services and goods to meet the wants, needs and desires of potential customers.  Get after the hard work America, and life will be as good as we earn.

 

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