My View From The Country

Fiscal Cliff Turns Out To Be Just A Prelude

The saving grace for politicians was that expectations weren’t just low, they were non-existent. Sadly, however, the issues are very real and they will have to be dealt with at some point.

I have to admit that the whole fiscal cliff fiasco of last week was more than just a little surreal. It’s generally accepted that Republicans lost the debate, but what makes the situation surreal is that, in some ways, both sides won.

The Bush tax cuts were extended almost in their entirety, something few would have thought possible two years ago, let alone six months ago. Of course, President Obama won the major point of the fiscal cliff debate, even if the tax increase on the wealthiest Americans is irrelevant from a dollar standpoint. It was a major political victory for him, though devoid of any real substance.

The whole point of the fiscal cliff was supposed to be about reducing the deficit. However, the only certain outcome of the fiscal cliff deal is that the deficit (currently at almost $16.5 trillion) will continue to grow at a record, and unsustainable, pace.

Another Perspective: How Do We Solve The U.S. Debt Crisis?

Of course, one must understand the vocabulary of the Washington Beltway to see how we arrived in such a situation. In D.C., spending cuts are no longer actual cuts but rather decreases in spending; similarly tax cuts have become the elimination of tax increases. A “balanced” approach means increases in revenue must equal decreases in spending, ignoring that the problem has been the phenomenal growth in spending in recent years.

The middle class tax break heralded by both sides of the aisle is actually a tax increase, as a family making $50,000/year will see their tax bill jump by $1,000. That is something that will become very evident early in this new year.

In truth, the last-second deal to avert the fiscal cliff only accomplished the easy things. It postponed for a few months the real fight, which is when the sequester cuts will once again kick in. Theoretically, the fight could be waged again over the current debt ceiling, which could be reached as early as the middle of February. And while everyone recognizes that spending must be addressed, nobody seems willing to address entitlement spending.

The battle is being waged in the court of public opinion; the argument being advanced is that nobody should be allowed to play politics over the debt ceiling. If that argument carries the day, then the showdown will probably not occur until the new fiscal cliff deadline. However, the luxury of being able to delay fixing this problem is melting away with every day.

With the House beaten and its favorability ratings at an all-time low, one wonders whether that chamber has the resolve to put up a big fight the second time around. Meanwhile, the Senate doesn’t appear inclined to vote on an actual budget anytime soon. The one thing that pundits agree on is that House Speaker John Boehner was politically outmaneuvered at nearly every turn in this process. Still, he was reelected to his House leadership position.

The financial markets’ reaction to the deal is difficult to assess. Some said the markets had already priced in concerns about going over the fiscal cliff. There was a little strength immediately following the news, but the markets did little more than a collective sigh in the end.

Agriculture did see some direct benefits. Disposable income as a whole will drop, but not nearly as much as it could have. Beef demand will be negatively affected, but the key will be whether the overall economy improves or continues to stumble. The death tax exemption of $5 million/individual was extended for another year – still nothing approaching a permanent solution, but better than the alternative. Capital gain tax rates will jump by 5%, but it could have been worse. And the 2008 farm bill was extended for another year. Though it’s still subject to appropriations work, it does eliminate some uncertainty for the ag community.

A Closer Look: Fiscal Cliff Moves Estate Tax In Right Direction

I guess the saving grace for politicians was that expectations weren’t just low, they were non-existent. Sadly, however, the issues are very real and they will have to be dealt with at some point.

Discuss this Blog Entry 10

Blaine (not verified)
on Jan 11, 2013

Excellent recap on current and coming issues, Amanda.

The real truth is that by placing our faith in a defunct government system that refuses to reign in spending, we are taking ten steps backwards with NO steps forward. The agreement at year's end was nothing more than a band-aid, and old one with a wrinkled corner already coming up on one end:)

The best advise, at least for me, is to take care of your own home. We are all impacted by the whims and inaction of Washington, but if your house is in order you may buffer some of the storm. And yes, as Amanda sites, BEEF will be impacted, too. That said, we are also close to that supply-demand pricing force and there certainly is no shortage of people, so until herd expansion catches up with demand, the next few years should be pretty good. Of course, if only rain would fall and feed prices could stabilize, but I can't be able to dream that big these days, either.

Best wishes to all in 2013. Take care of your own, and those close to you.

Anonymous (not verified)
on Jan 14, 2013

Amanda?

Sites?

brad kline (not verified)
on Jan 11, 2013

Your statement that the deficit is $16.5 trillion makes me think you don't have a clue what you are talking about, so it makes me want to ignore your entire article.

on Jan 11, 2013

Apologize for the error. The total national debt is $16.4 trillion. Budget deficit is $1.1 trillion. -- http://www.usdebtclock.org/

Anonymous (not verified)
on Jan 13, 2013

Your article just scaped the tip of this iceburg.
How did we get into this mess? plain and simple, DEMOCRATES AND REPUBLICAN PARTIES. If something is not done to correct the problem that washington has caused, than we all can kiss goodbye to our way of life as we have known it.
We need term limits on all congress. We need people in Washington that remembers why we sent them to Washington, and it wasn,t to line their pockets. Maybe we need a law to make the democrats and republicians illegal. BUT, UNTIL THEY STOP PLAYING GAMES AND GO TO WORK TO FIX THIS MESS, NOTHING WILL BE DONE. Congess is too busy playing politics.................

Donald Ferguson (not verified)
on Jan 14, 2013

As long as the goal for Congress is to get re-elected expect more of the same. I wish I could vote myself a raise. I also wish we could vote on term limits. All just wishful thinking.

A Vega (not verified)
on Jan 18, 2013

Where is the beef? I think this not the Beef Magazine any longer. It is being converted into a politic think-thank magazine. Please rename it - I would continue looking for cattle and beef production articles.

on Apr 29, 2013

And it is not like we did not know that Fiscal Cliff 2013 was just a beginning of pretty ugly changes. Despite us being in a desperate need of changes no one was ready to such a turn. You know, while it was still possible to make some improvements which would not hurt too many people that much, the government remained inactive. And now that everybody is vulnerable enough, they start making cuts and increase taxes. This is not really smart! Thanx for the post a lot!

on Aug 8, 2013

I agree with you, the deficit will still grow at a record and unsustainable pace in spite of the deal. The middle class tax break is actually a tax increase. He points out the benefits of the deal to the agriculture sector.
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on Oct 3, 2013

Without a doubt, one of the biggest challenges facing the nation right now is the growing U.S. budget deficit. empleos en guadalajara

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What's My View From The Country?

As a fulltime rancher, opinion contribur Troy Marshall brings a unique perspective on how consumer and political trends affect livestock production.

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Troy Marshall

Troy Marshall is a multi-generational rancher who grew up in Wheatland, WY, and obtained an Equine Science/Animal Science degree from Colorado State University where he competed on both the livestock...

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