© The Financial Times Ltd 2015 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
December 5, 2012 11:32 pm
From Mr Louis Golino.
Sir, I am not nearly as optimistic about the prospects for resolving the fiscal cliff as Roger Altman is (“Why the fiscal cliff will be averted”, December 4).
A lot of people are downplaying the potential impact of going off the cliff today, much as the impact of not extending the debt limit was downplayed in the summer of 2011. Then, as now, financial markets were exerting the pressure Mr Altman discusses, but it was not until after the US had its credit rating downgraded that a deal was reached. I have read that the failure to reach a deal earlier cost American taxpayers almost $200bn.
We can already see the impact of the uncertainty caused by worries about going off the cliff not just in equity market pressure but also in reduced business and consumer confidence, a sharp reduction in small business spending, and other areas.
In addition, I agree that reforms should be made to social programmes, but these have to be done carefully and separately from the deal on the Bush-era tax cuts. A consensus is emerging regarding provisions such as reducing cost-of-living adjustments, but as a Federal government retiree I can tell you that current adjustments already fail to come even close to keeping up with the true cost of living because the US government calculates inflation in ways that substantially undermeasure it. And raising the Medicare eligibility age saves very little, and is not justified. Means testing (which is already used) should be increased, and the cap on wages subject to Social Security taxes should be lifted, but slashing food stamps and similar austerity measures are totally inappropriate on both economic and moral grounds.
It is middle-class Americans who will fuel the economic recovery if they are given the financial means to do so. And unless a deal is reached soon, credit rating agencies and holders of US government debt may begin to lose confidence in Washington prior to the end-of-year deadline.
Louis Golino, Rockville, MD, US
Copyright The Financial Times Limited 2015. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.
Sign up for email briefings to stay up to date on topics you are interested in