We are only days away from finding out whether or not we as a nation take a dive off this ominous, politically charged fiscal cliff – and there is much uncertainty and question around how we will do it. Will we do a “Thelma and Louise” and go charging off or will it be a more gradual dive, like that of a swan coming in for a landing?
Either way, we are going down, not up. And no matter who you are, you will likely feel the impact.
Last week, at the Puget Sound Regional Council’s Defense Partnership meeting, we were informed that our national budget will not be passed and that we will once again be under a CR (Continuing Resolution) for FY13. Fiscal cliff or not, this failure to pass a budget is not good. We also learned that our great state of Washington has some $5 billion in military construction backlog. Under a CR, no new contracts will be issued and as one company CEO expressed to the Congressional representatives in the room, this will cost hundreds of jobs in the Puget Sound region.
But hey, that’s only one data point. How bad can this “fiscal cliff” thing really be? Hold on – the experts (and TIME magazine) say it won’t be pretty.
While we all lived to see another day despite the end of the Mayan calendar, come 12:01 am on Jan 1, 2013 the Bush-era income tax cuts expire and that means a tax hike for all earners. Taxes on capital gains and dividends will go up as well. But that last point only affects the rich guys, right?
What if you’re not rich (which in today’s terms means you’re unemployed)? If you’ve been relying on the federal extension for your state unemployment benefits, you may be one of the 2.1 million Americans who will find no check on the day it usually arrives.
For those who are employed, your checks (and mine) will be at least 2 percent smaller because of the expiration of the payroll tax cut. If you earn $50,000 a year, that works out to be about $40 a paycheck. Powdered milk never tasted so good.
If you are in the military, or support the defense industry, expect continued and perhaps even increased troop strength reductions – and don’t expect a raise. The sequester kicks in on Jan. 2 and that will trigger over 9 percent in defense spending cuts. The Pentagon has been preparing for the sequestration (just in case Congress couldn’t do their job), so it won’t be a huge ripple to the system when it first hits; but moving forward, until the budget standoff is resolved, new contracts are frozen and hundreds of programs and projects will either be delayed, indefinitely suspended, or killed all together. With Boeing and the general defense industry being a significant employer in this state, this will impact the Puget Sound.
It isn’t all bad news though. According to TIME, CEOs with large companies are “racing to pay dividends before the fiscal cliff.” So, just maybe, your CEO’s heart will grow three sizes before the New Year and you’ll get a nice cash bonus. If this happens, put the cash in your sock drawer for that “just in case” moment.
So, Happy New Year all – what the “fiscal cliff” means to you is that you get a tax hike and a pay cut (or no check). Some of you will have to cut out your coffee budget – and then we’ll have grumpy people for 2013. Oh joy.
Michael Schindler, Navy veteran, and president of Edmonds-based Operation Military Family, is a guest writer for several national publications, author of the book “Operation Military Family” and “The Military Wire” blog. He is also a popular keynote and workshop speaker who reaches thousands of service members and their families every year through workshops and seminars that include “How to Battle-Ready Your Relationship” or “What Your Mother-in-Law Didn’t Tell You.” He received the 2010 Outstanding Patriotic Service Award from the Washington State Department of Veterans Affairs.