In an op-ed published in The Hartford Courant on June 24, Bill Craighead, assistant professor of economics, proposes a policy solution to avoid economic disaster as the U.S. confronts the so-called “fiscal cliff” at the beginning of 2013. As Craighead explains in the piece, the cliff refers to the simultaneous expiration of Bush-era income tax cuts and Social Security payroll tax cuts, as well as automatic cuts in government spending mandated following last year’s debt ceiling stand-off.
Craighead proposes that, “The tax increases could be made to occur at a more appropriate time by instituting triggering criteria that would delay them until the state of the economy has improved and then phase them in. For example, the tax changes could be set to begin once the unemployment rate has fallen to a more reasonable level, like 5.5 percent, and remained there for six months. At that point, the increases could occur in three or four steps, with each one occurring as long as the unemployment rate has remained below a specified level for six months.”
He concludes, “By sparing the economy a big blow next year, while putting government debt on a reasonable long-run path, [this plan] would buy some time to work out bigger issues after the next election.”