Fiscal Cliff Averted: And Here Are the Next 6 Crises to Worry About

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House Rep. John Boehner
Here's the bright side: After over a year of fretting, the fiscal cliff has finally been averted -- at least for the time being. In a thirteenth-hour agreement, Congress and President Obama decided to raise taxes a little bit, delay the scheduled budget cuts that promised to tank the economy, and craft a plan that will delay a total economic meltdown.

While we've managed to escape a devastating, intentionally-created budget crisis, the war isn't over. Over the next several months, Congress and the president will need to navigate several potential fiscal disasters that, if neglected, could be utterly horrifying. If you still have the stomach to look closely into the ragged visage of utter political incompetence, consider this list of six ways Washington could mess things up for millions of us all over again.

1. Sequestration, the Sequel
Remember sequestration, the stunningly stupid $1 trillion in cuts that Congress imposed on themselves (and us)? Remember when they realized that they couldn't reach an agreement on what actually needed to be cut? Well, they still haven't reached an agreement, and they still haven't taken the sequester off the table. If they can't come to a conclusion within two months, the sequester will kick in, slashing funding to pretty much every federal program and sending the economy in a screaming nose dive.

Happy New Year.

2. The Debt Ceiling
In theory, setting a debt ceiling for the nation was a good idea: Rather than wasting time arguing over every silly little federal expense, the debt ceiling -- introduced during World War I -- enabled Congress to simply set a limit on the amount of money that the government could spend. Since then, the debt ceiling has been raised dozens of times, generally without much trouble or fuss. In 2011, however, Republicans in Congress battled with the president over the debt limit in an attempt to force the government to cut spending. In the process, they provoked a credit rating downgrade for the U.S., threatened to tank our economy, and set the stage for the fiscal cliff.

In a couple of months, we're set to go through the same mess all over again.

3. Austerity Is on Its Way
It's easy to view the federal budget as a sort of household purse writ large. Based on that philosophy, when money gets tight, the government should do what families do -- tighten the purse strings, cut the fat, and generally pull back on expenses. And, now that Obama has locked in many of the Bush tax cuts, things are going to get VERY tight.

The trouble is, while it's easy to deploy cliches, real-life government budget cuts are a bit more complicated. The biggest targets -- defense, Social Security and Medicare -- have rabid defenders, while cutting from easier targets -- like education, Medicaid, and other programs that help the poor and middle class -- tends to compound a nation's economic problems rather than improving them, due to their beneficiaries suddenly having so much less discretionary money to spend.

In other words, austerity is the definition of a rock and a hard place, and we're going there in late February.

4. The (Temporary) Rise and (Inevitable) Fall of the American Paycheck
Everybody knew the payroll tax holiday wasn't going to last forever. While it's fine to cut the cash flow to Social Security for a little while, any long-term cuts to its income will have bigger repercussions -- like the ultimate dissolution of the program.

Even so, the holiday was a nicely-designed bit of stimulus. By giving a 2 percentage point break on payroll tax withholding, the government poured money directly into the pockets of every American worker. Now that it's gone, the median American family will now have $1,000 less to spend in 2013 than they would have had, and the economy will lose hundreds of millions of dollars in discretionary income that was helping to fuel the economic recovery.

5. The Ongoing Battle With Unemployment
While the unemployment rate has dropped from its Great Recession peak, it remains high -- and even those who have managed to find a job often find themselves settling for low-paying, low-benefit part-time work that isn't sufficient to keep a middle class family afloat.

Part of the problem is that companies are (allegedly) worried about making long-term plans while an economic disaster looms on the horizon. While the fiscal cliff deal has kept the economy from flying off a cliff, it doesn't resolve the fundamental problems in the economy. And, with austerity measures threatening a deep cut to the economy and a debt ceiling debate threatening America's solvency, it still doesn't look like a great time to hire new workers.

6. There's Still No Deal on Superstorm Sandy Relief
On one level, the incredible devastation of Hurricane Sandy is an isolated problem -- its effect, after all, was largely limited specific parts of the East Coast. Then again, the mid-Atlantic and Northeast are among the country's most densely populated areas, and the continued delay in federal funding to begin rebuilding the area is affecting many millions of citizens. What's more -- as a couple of prominent Republican's, New Jersey Gov. Chris Christie and New York Rep. Peter King, both noted, the Congress has taken longer to respond to this problem than to any comparable disaster in recent memory.

While it's easy to chalk up the Sandy debacle to Congress' current bureaucratic gridlock, it's also worth noting that the Republican party has a long history of blocking disaster relief. Little surprise: To a true budget hawk, disaster relief is yet another overly-generous government program.

But at least the first step of resolving that issue may be taken Friday, assuming the House passes the bill that Speaker John Boehner has scheduled, and approves $9 billion in flood insurance for the victims. Other bills will follow later this month, to send a full package of $60 billion to address the issues created by the hurricane. All $60 billion in aid has already been approved in a package passed by the Senate.


Bruce Watson is a senior features writer for DailyFinance. You can reach him by e-mail at bruce.watson@teamaol.com, or follow him on Twitter at @bruce1971.

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101 Comments

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krzyston

There is nothing wrong with America that cannot be cured with what is right in America ….William J. Clinton alexander krzyston

January 07 2013 at 4:54 PM Report abuse rate up rate down Reply
boehnerisababy

Wow!.........that spray and glow tan really works! Im the most tannest person on capital hill.

January 07 2013 at 12:09 PM Report abuse +2 rate up rate down Reply
mitchnoconnell

Folks the tax revenue issue is resolved. I also agree part of the problem is spending and my party has been part of that spending problems just as those horrible democrats have been. Folks often ask me why we did not refuse to not raise the ceiling when Bombs away Bush was President. Well that was different, Bombs away Bush was a Republican and we were in the midst of the unprecedented move of cutting taxes and initiating two unfunded wars and we were told by buckshot Cheney that President Reagan said deficits don't matter so that's why we said yes to repeated calls for increasing the debit ceiling......And we all know that we Republicans have always been fiscally responsible....CONS good, DEMS bad....LOL

January 06 2013 at 9:16 PM Report abuse +2 rate up rate down Reply
evan_barthold

Oh by the way, I want to thank all you 1% ers for making it possible to get welfare, food stamps, a free cell phone, rent and anything else I can get for free, you guys rock

January 06 2013 at 8:39 PM Report abuse -1 rate up rate down Reply
2 replies to evan_barthold's comment
evan_barthold

can you work more hours I want to upgrade my cell phone and free cable

January 06 2013 at 8:41 PM Report abuse -1 rate up rate down Reply
1 reply to evan_barthold's comment
mitchnoconnell

Hmmm free cable? Wow, great idea! I'll talk to Johnny about that, I'm sure he and Cantor can come up with something, thanks for the suggestion!!!!

January 06 2013 at 9:41 PM Report abuse -1 rate up rate down
mitchnoconnell

Great news Evan! You can trade that junky old cell phone for a new smart phone. We managed to get that tucked into the fiscal cliff deal too!!!! You will get unlimited calls, text, email and free mobile hotspot. Just thank your majority house Republicans!!!!

January 06 2013 at 9:35 PM Report abuse rate up rate down Reply
evan_barthold

My mom jus brawt me sum new hotpockets n coolade, gotta go

January 06 2013 at 8:35 PM Report abuse -1 rate up rate down Reply
evan_barthold

I gotta get the hang of milkin dees bulls tho

January 06 2013 at 7:55 PM Report abuse -2 rate up rate down Reply
1 reply to evan_barthold's comment
evan_barthold

uh huh, how do you think i got kicked in the head ?

January 06 2013 at 8:17 PM Report abuse -2 rate up rate down Reply
evan_barthold

Hey perez Obama got R backs Yo, we are hookin up with the muzzlim dudes and take yo cuntry

January 06 2013 at 7:40 PM Report abuse -2 rate up rate down Reply
theycallmeroy3

The only place Obama should've gone for Christmas Vaction, is Annie Duke's house. Teach him a pair of two's doesn't beat a full house. Obama pretends to have a great hand, only to lose on the flop. The Republicans won on the last tax two's.

January 06 2013 at 4:20 PM Report abuse rate up rate down Reply
1 reply to theycallmeroy3's comment
theycallmeroy3

Sorry, vacation, or vatican. Either or.

January 06 2013 at 4:23 PM Report abuse rate up rate down Reply
theycallmeroy3

Its equal opportunity when it comes to sneaking pork into ' the last minute deals.' Last minute cost Americans more. Most members in Congress know how they're going to vote, weeks in advance. Far easier to wait for the last minute to sneak thing in, and get it. Look at TARP. What a pork-a-thon.

January 06 2013 at 3:25 PM Report abuse +2 rate up rate down Reply
democrackso

mitchnoconnell
Tsk why so nasty today and every other day?

++++++++++++++++++++++++++++++++

yeah why are you.

January 06 2013 at 12:03 PM Report abuse rate up rate down Reply