Investment Contrarians

Why “Plan B” Is Set to Fail

By for Investment Contrarians |

“Plan B” Is Set to FailThe U.S. House of Representatives is planning to throw out a “Hail Mary” in the ongoing “fiscal cliff’ discussions, but I really doubt it’s going to work. Frustrated by the lack of a resolution to the pending automatic budget cuts and income-tax hikes, the Republican-controlled House is looking to push forth what they call “Plan B,” which extends the Bush-era tax cuts to those making less than $1.0 million.

This is no secret development that will resolve the fiscal cliffhanger and budget cuts, but the Republicans are proposing that their tax plan be passed in the House to try to avoid the fiscal cliff. The problem is that Plan B will not get approval in the Democratic-controlled Senate, so it will fail. President Obama has moved the threshold for the tax cuts to $400,000, up from the U.S. presidential election talk of $250,000, but we all know there needs to be some compromise.

Moreover, besides the tax cuts, the two parties are also divided on the budget cuts to Medicare and Social Security, the two largest components of the mounting $16.3-trillion national debt. The legal limit is $16.4 trillion, hence the need for the budget cuts.

As I have said in the past, we need to get the country working and back on its path as the world’s dominant economy and superpower. Of course, to achieve this status, the United States had to spend trillions on defense, another major area that will see budget cuts.

I love capitalism, and the idea that you can generate unlimited wealth to drive consumer spending. This is the reason why the United States is one of the richest countries in the world, with its gross domestic product (GDP) growth driven by consumer spending. Yet, despite the ability to create wealth, the income gap between the rich and the poor has been widening. In my view, this is an issue that needs to be addressed, as there is a societal need to help the less fortunate. In America, the richer are getting richer, while the poor are getting poorer, and this is the reason why President Obama is fighting for his income tax and budget cuts plan.

With more than 30 million Americans using some form of food stamps, there is a great disparity in income in this country.

The income gap is widening. In 1962, the top one percent of income earners had a net worth of 125 times the median household, according to the Economic Policy Institute. The income gap surged to 288 times in 2010 and is getting worse. President Obama realizes this and wants to remedy the situation for income taxes and budget cuts.

It will not be easy, but the fiscal cliff must be averted; yet at the same time, difficult decisions will need to be made with respect to budget cuts and higher income taxes.

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  • Sunnie Campbell

    Thje American voters are sick of the inability of the House and Congress to stop puting our country into this disaster of our financial fall.
    We should vote for their incomes to cease until they put Americans first, not thier "Party" whichever it is.. They are not representing our Best Interest, only their Party It is time for them to come together Now!…or get out and give back all thier pay they have taken.