When I was nineteen years old, I had just enlisted in the Navy and received orders to report to San Diego for boot training. That in and of itself was a big adventure as I had only flown once before, and that was a short hop from Minneapolis to Rochester (MN). We took off from the Twin Cities airport for a four hour trip to San Diego in a Boeing 737 aircraft. The 737 is a smaller jet which has one engine on each wing. Somewhere over Arizona, I was trying to doze before we landed. I was awoken to what sounded like someone throwing a snowball at the plane. The crew door flew open and one of the pilots came running down the aisle and looked out a window on my side of the plane. The engine under the wing had exploded and sparks and flames were coming out of the rear. The pilot managed to feather the damaged engine until the fire was out. However, even though the 737 was designed to fly on one engine in case of an emergency, this plane was starting to struggle.
We were informed by the pilot an in flight emergency had been delared and we were going to try to make it back to Phoenix. However, in the event we could not make it, the flight attendants would be prepping us for a crash landing in the desert. I was in shock and disbelief. It was enough of a trauma just going to boot camp, but this was like a bad dream. My future, my life depended on the skill and acumen of the two men sitting up in the cockpit. For the first time, I had no control of my situation. My life was dependent on someone else doing the right thing to save the day. We did safely land at Phoenix. Everyone cheered, and later than evening we continued on to San Diego. Even though I ended up logging over 1,000,000 business travel miles on NWA, it took years to get over my "white knuckle" fear of flying from that ill fated flight in 1969.
In five short months we are collectively going to have an experience similar to hoping against hope someone in the nation's cockpit can get us home safely. I am talking about the approaching fiscal cliff, or "taxmageddon" as some call it. I have been doing a lot of research on this since the beginning of the year, and frankly, I am amazed to see the lack of urgency in preventing it. One economist had said if left unfixed, the financial impact to a typical family would be similar to the price of gas going up to $10/gallon over night. It is not just one tax going up, it is a slew of them, and EVERYONE will be impacted.
Consider the following for Jan 1, 2013:
The Bush-era tax cuts will end (this is huge). Every one of the existing income tax brackets will be ratcheted up, starting with the lowest 10% bracket, which will be hiked to 15%. The 25% bracket will jump to 28%; the 28% bracket will go to 31%; the 33% bracket will be replaced by a 36% bracket and the 35% bracket will soar to 39.6%.
The maximum rate on long-term gains is scheduled to increase to 20%.
The maximum rate on dividends will skyrocket to a whopping 39.6%.
Investors in the two lowest income brackets who currently pay 0% will have to shell out 10% on long-term gains and 15% and 28% on dividends.
The death of the Bush tax cuts also kills temporary federal estate and gift tax breaks and a measure to ease the marriage penalty for low and middle income couples.
On top of that, workers will lose a 2% cut on social security taxes. That means an average $1,000 tax increase come Jan. 1 for virtually all workers.
The death of the Bush tax cuts also kills temporary federal estate and gift tax breaks and a measure to ease the marriage penalty for low and middle income couples.
On top of that, workers will lose a 2% cut on social security taxes. That means an average $1,000 tax increase come Jan. 1 for virtually all workers.
The AMT fix will also end which will expose middle class Americans to the crippling effects of losing most, if not all deductions.
In addition there will be five new taxes that fund Obamacare.
Finally, even though these are not taxes, don't forget about the job killing sequestration as well as the debt limit which will also hit in the same time frame.
One of my favorite analysts on CNBC has referred to Jan 1, 2013 as "better than the perfect storm for financial misery". Truthfully, I think he is right. Even if we had a robust economy, this cliff would be daunting to overcome. Factor in with the above the international issues - possible war with Iran and the possible collapse of the Euro. Even though we are in a short lived euphoria that Europe is fixed, it is not. There might not be enough tea in China to put Humpty Dumpty back together again. In other words, the debt obligations might be too high with the revenue possibilities to little to fix Europe. We might have already gone around the bend. Also the closer Iran gets to finishing their first nuke, the more probable war will become. Many experts believe Iran will be at that point sometime in 2013.
Finally, lets not forget about our anemic economy. With GDP only slightly above zero and real unemployment over 10%, we are not at all in good shape. We need things to be dead perfect to have a prayer in getting our economy back on track. Having a weak economy coupled with the rapidly approaching cliff leads many to take very pessimistic view of the future. We are in the back of the plane and altitude is being lost. With a crash imminent, the pilots are busy doing other things instead of trying to save the plane. Those of us in the back of the plane know we are in trouble and there is nothing we can do about it.
I have said for a long time that our financial problems are a bi-partisan effort. Both sides are guilty as sin for getting us here and even guiltier for not fixing them. We elect people out of trust - first do no harm and then fix what needs to be fixed. The only idea I have heard so far is to extend this mess until after the election. Every time the can gets kicked down the street, the problem gets worse. Leaders, fix it now! You have five months - time to work and get it done. You are the pilots and we are the passengers. If we could fix it, we would. However, we can't - we elected you to do it. The plane is crashing and the cliff is approaching. Please save us - save the day.
In addition there will be five new taxes that fund Obamacare.
Finally, even though these are not taxes, don't forget about the job killing sequestration as well as the debt limit which will also hit in the same time frame.
One of my favorite analysts on CNBC has referred to Jan 1, 2013 as "better than the perfect storm for financial misery". Truthfully, I think he is right. Even if we had a robust economy, this cliff would be daunting to overcome. Factor in with the above the international issues - possible war with Iran and the possible collapse of the Euro. Even though we are in a short lived euphoria that Europe is fixed, it is not. There might not be enough tea in China to put Humpty Dumpty back together again. In other words, the debt obligations might be too high with the revenue possibilities to little to fix Europe. We might have already gone around the bend. Also the closer Iran gets to finishing their first nuke, the more probable war will become. Many experts believe Iran will be at that point sometime in 2013.
Finally, lets not forget about our anemic economy. With GDP only slightly above zero and real unemployment over 10%, we are not at all in good shape. We need things to be dead perfect to have a prayer in getting our economy back on track. Having a weak economy coupled with the rapidly approaching cliff leads many to take very pessimistic view of the future. We are in the back of the plane and altitude is being lost. With a crash imminent, the pilots are busy doing other things instead of trying to save the plane. Those of us in the back of the plane know we are in trouble and there is nothing we can do about it.
I have said for a long time that our financial problems are a bi-partisan effort. Both sides are guilty as sin for getting us here and even guiltier for not fixing them. We elect people out of trust - first do no harm and then fix what needs to be fixed. The only idea I have heard so far is to extend this mess until after the election. Every time the can gets kicked down the street, the problem gets worse. Leaders, fix it now! You have five months - time to work and get it done. You are the pilots and we are the passengers. If we could fix it, we would. However, we can't - we elected you to do it. The plane is crashing and the cliff is approaching. Please save us - save the day.
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