By Dr. Scott Alsobrooks, PRCC
The Picayune Item
In preparing this first article for 2013, the big topics running through the media include the ominous "fiscal cliff" and the “debt ceiling" incurred by our federal government. While my column is primarily focused on local economic and education issues, why would these big federal issues deserve attention in this space?
If our federal government does not reach some kind of resolution, a lot of people will certainly be hit where it hurts most, in the pocket book. Economists project that the effects on an average American family of four, with a combined household income of approximately $50,000 would result in a net increase in tax withholding to be paid in federal income taxes of $1,870 per year; or a 26.45 percent increase (http://www.paycheckcity.com/fiscalcliff/cliff.html). That would effectively remove about $160.00 per month in spending power from an average American family. Not only would this hurt that average American family, but it is going to hurt the many businesses where these families spend their money. It does not take an economist to see where this would take our city, county, state and country; most probably into another recession. And all of this is taking place just as we seem to be crawling out of the current Great Recession.
Of course, law makers understand this, but face the fact that the government has reached it's current debt ceiling which is at a whopping $16.4 trillion dollars. This debt has certainly been built up due to government spending caused by this current Great Recession. This certainly places lawmakers "between a rock and a hard place"; how does the government pull this country out of this big hole?
Does the government increase taxes, or cut spending? Or both? These are really perplexing issues that will certainly dominate major media headlines in 2013. Without a doubt, taking money from the average American's pocketbook and diverting that to the federal government in the form of taxes effectively takes money from the local economy. Let's hope that the government finds a way to reduce the deficit without sacrificing the average American's standard of living, and the many local businesses that rely on them. If the government navigates down the higher tax route, then many average citizens will hit their own personal "fiscal cliff" and "debt ceilling."
(Dr. Alsobrooks currently serves as the Vice President of Economic and Community Development at Pearl River Community College.)