Yesterday, the President made a White House video featuring a middle-class family in Virginia.  Of this high school teacher and her family, the President stated, “They’re keeping it together, they’re working hard, they’re meeting their responsibilities.”  In addition to the President’s statement, the teacher, Tiffany Santana, pointed out that she and her family, like millions of other Americans, have tightened their belts during these hard economic times. Then, she proceeded to ask the government to do the exact opposite by extending tax cuts and providing for continued entitlement increases. 

What’s remarkable about this occurrence is how many people have failed to recognize the contradiction in the two halves of this dilemma.  The President, alongside his constituents on this issue, appears to share this convoluted and misinterpreted point of view.  Families understand that when the economy is weak, and they have less income, they must reduce their spending and/or seek new means of actual income in order to meet their responsibilities. Unlike government, families will face immediate and potentially disastrous consequences if they do not. As the CBO has pointed out, if the Government is allowed to go over the fiscal cliff, the Federal budget will drop by a projected 560 billion dollars between 2012 and 2013, even allowing for a weakening economy reducing the tax base. If the fiscal cliff comes to pass, the GDP is expected to grow by +0.5% in 2013 compared with 4.4% if the fiscal cliff is averted.

At first glance to the American public, this appears to make averting the fiscal cliff the obvious and correct choice. Unfortunately, this concept only applies if one does not look past 2013. In May of 2012, the CBO posed the question, “What would happen if law makers change fiscal policy in late 2012 to remove or offset all the policies that are scheduled to reduce the Federal budget deficit by 4.4% of GDP between calendar years 2012 and 2013?" In the long-term eliminating or reducing the fiscal restraint will accelerate the growth of the budget deficit, and before long it will surpass the GDP. At that point, the consequences for all families in the US will be far more catastrophic then the $2,000 the average middle-class family will stand to lose in 2013, and have a far worse effect than a reduction in the growth rate of the GDP.