Be afraid, be very afraid. Unless by some unforeseen miracle President Obama and his party of redistribution have a “come to Jesus” moment and change their ways before January, America will be driving off a fiscal cliff Thelma and Louise style.
The fiscal cliff is actually more like a four-engine jet airplane where one engine fails then another, then another, resulting in the inevitable fiery crash. All along, the passengers look out the window and see that they are in mid air, so they think all is well. The captain (president) continues to make misleading announcements about a smooth flight and on-time arrival. The in-flight movie continues uninterrupted. The flight crew (the press) serves beverages and distracts the passengers from looking outside. Most of the plane is asleep, reading, watching the movie or playing electronic games and unaware that the plane is plummeting to earth at an ever-increasing rate. Some passengers question the status, but are told to be silent. What can they do anyway? They are not in command of the plane.
Engine one failure: A combination of various tax hikes will result in a near half-trillion dollars in tax increases all going towards more government spending. The ending of the Bush-era tax cuts combined with Obamacare taxes and payroll tax increases will be the trifecta of tax increases. These taxes will increase an average of $3,500 per American household by most estimates.
Just as nasty is the sun-setting of the estate tax reductions that will affect over 100,000 households. It will not be immediately noticeable because taxes are not incurred until a death occurs, then Uncle Sam takes 55% of everything over $1,000,000 of the deceased assets without some complicated planning. Farmers, ranchers, and business owners will be hit the hardest. Employees will be affected when the business owner dies and the surviving family is forced to liquidate the business to pay the estate tax. Goodbye jobs where this happens.
Increasing capital gains taxes will complement the lack of confidence in stocks and equity markets will continue to decline. Debt markets will offer no reprieve. Capital and retirement accounts will be reduced to a fraction of what they once were. Retirees will be forced to work where possible and put more demands on job availability.
Engine two failure: The debt ceiling will be raised and the country will undergo another credit rating downgrade. Inflation will further ensue and everyday products will continue to skyrocket to offset the increase of an ever-growing money supply fueled by more national debt and its associated costs. Middle income America will be squeezed the most and personal default rates will continue to increase and a second housing crisis will ensue that will be worse than the first. Home values will decline rapidly and banks will rarely loan money. Dodd-Frank legislation will continue to cause the shutdown of local independent banks and mega national banks will fail in ever-increasing numbers. The Federal government will be unable to bail them out.
Engine three failure: The jobs market will implode and the jobless rate will skyrocket. Real unemployment rates will reach record levels at 25-50%. The economy will be in freefall. The federal government will be unable to make good on entitlement programs and provide for the “poor and needy” and unemployed. World markets will collapse.
Engine four failure: Due to the strain from the other engine failures, the last engine is unable to withstand the stress. Mass chaos will ensue and basic elements of society will break down. Money will become worthless. Barter will be commonplace. Government transportation will cease. Food supplies will be disrupted. Basic necessities will be difficult to attain.
Healthcare will become rudimentary. This depression will be different than the one starting in 1929 because the majority of our society is no longer agriculturally based. Food panic will be commonplace in metro areas. Lawlessness there will ensue.
Is this scenario going to happen all because our government raises taxes or increases its debt limits? Maybe. Will this all happen in a few months? Unlikely. In five to ten years? Your guess is as good as mine. Am I a doomsdayer? Am I crazy? Maybe. Then again, maybe not. Is history on my side? Yes.
For the non-believers, just keep eating ice cream and candy bars washing them down with sodas and believing that the eventual heart attack isn’t coming.
Whatever you do, don’t look out the window.