The Fiscal Cliff, Debt Cliff, and Now the Milk Cliff (It’s DC Drama at it’s finest)
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This is a Reblogged from www.dailyfinance.com.
Posted byRalph Barker
The sky isn’t falling, yet. But, it seems everything else is about to including your bottom line. We are about to fall into more debt, more taxes and higher prices if our leaders don’t act quickly. All of these things, if they take place, bode badly for the economy and, of course, for you and me.
Most of us who have been around a while realize that all the political gambits that are played in Washington right now are pure drama. The tension will rise, tempers will flare, and eventually something will happen, or not happen, and we will have a better idea of what life is going to be like in 2013.
Now, however, it’s just a game and the winners are those who don’t get the blame when all the dust settles. In the meantime, we are held hostage. What happens in the next two or three days may just set the stage for what will happen in the election of 2014.
The possibility of falling off of the three cliffs that now loom before us is real. It is like a fiscal perfect storm aimed right at our wallets. We are not talking peanuts here either. We are talking the farm.
Now should our leaders fail to act, and act now, everyone’s standard of living will suffer significantly. This is a real crisis. So, what is the response of our elected officials? Well, the President flies off to vacation in Hawaii and the Congress goes home for Christmas. Now, the President, to his credit, is cutting his vacation short as he should. The Congress is scheduled to return this weekend, just two days before the January 1st deadline, but aren’t they all cutting it a little close? Can they get anything done other than kick the football again down the road?
We’ve all heard ad nauseum about the fiscal cliff. But, what does it really mean and what’s going to happen should we suffer the worst outcome? Basically, there is a good chance that we will enter another and immediate recession. So far the stock market is taking it pretty much in stride although Friday it showed some signs of panic closing down –158.20.
On another note, consumer confidence is falling fast and hard. It dropped from 71.5 on the index in November to a 65.1 level in December during the Christmas buying season. With the future so murky and undefined this should be no surprise. It’s bad, but no surprise.
One major ramification of falling off the cliff, if things stay as they are, will be 600 billion in higher taxes and spending cuts. This means higher taxes for up to 190 million Americans and drastic cuts to our military and other programs. Some of the tax hits would be really big. For example, someone earning $1,000,000 or more would pay not a total, but an additional $250,000 at least. That’s huge. Even people making less than $50,000 can be expected to pay thousands more.
The fiscal cliff crisis is what’s on most people’s minds, but the milk cliff, really the dairy cliff, is nothing to sneeze at. A new Farm Bill has not yet been addressed by Congress. If a new bill isn’t passed or the old one extended the law would revert to the terms of the Agricultural Act of 1949.
Under the old Act, that would become the new law, the government would be forced to buy milk at double the going price. Who do you think the farmers will give first priority if this happens? Would they sell to you and me at today’s $3.65 per gallon or to Uncle Sam at $7.30 or more? As for me, with $8.00 milk I’ll eat my Wheaties dry and put some of that plastic spread on my toast.
For more extensive detail and history related to the milk cliff you can read more here: http://www.dailyfinance.com/2012/12/21/politics-gone-sour-why-the-price-of-milk-might-soon-double/
Now don’t forget that the price of milk isn’t the only downside. Everything made from milk, dairy products, would also be impacted. Here is a list of some of the major items that would likely suffer price increases or scarcity:
Cheese, butter, ice cream, pudding, custards, sour cream, yogurt, and whipped cream.
The list doesn’t stop here either. There are also many cosmetics that have milk as one of its ingredients. Milk is a major ingredient in many of our favorite desserts like cupcakes, pies, brownies, and cookies. Many salad dressings, soups, and chocolates use milk too.
If you have an infant in the house your baby formula will cost you more. It’s made from milk. If you have some time and some extra savings, you might want to pick up a cow or two this weekend.
It’s interesting that our government has dropped food prices from the inflation index so you may see no movement in the inflation index, but you will see movement, a downward movement in your checkbook if this particular cliff isn’t avoided.
Due to the emphasis on the fiscal cliff, many believe the milk cliff will take a back seat in the short run, but this could be long enough to start the surge in milk prices. It is doubtful Congress would ignore it long though. They would be getting earfuls from their constituents very quickly. For milk to double in price is something that people won’t ignore very long.
Finally, we have the debt cliff. It is really more of a mountain that keeps growing. Though our leaders may play political football with this issue they will raise the ceiling again. There is no doubt about this. They really have no choice unless they immediately lower spending to current income levels. Our nation probably wouldn’t survive that quick a solution.
The next few days will be filled with intense political drama. Let’s hope our President and Congress come to their senses and realize that this is not just another game. The consequences of falling off the three cliffs would be drastic and immediate.
We have to ask the question why, when everyone knew what was coming, that these important issues are being addressed one minute before midnight. And, we wonder why Congress has an approval rating of 18%. That’s lower than telemarketers, lobbyists and car salespeople.