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Physics and the Fiscal Cliff

12/04/2012 11:16 am 11:16:45 | Updated Feb 03, 2013

Newton's laws of motion are the basis for any classical mechanics course and they are the first things that physics students learn. They describe the way the world works and are typically used to describe the physical actions of objects. However, they can also be applied to the political world as well as the current issues in Washington, D.C. The goal of this article is to use the laws of motion to gain an understanding of why one ideology is not the best manner to handle the financial issues of the country and see if they can provide a direction on how to handle the mess and avoid the fiscal cliff.

For those living in the dark, the fiscal cliff is the scenario where the Bush tax cuts will expire; along with the payroll tax cut from the stimulus. This has the potential to stop the growing economy and possibly send the country back into a recession or worse. In Washington, there is a war over how to handle this problem and it fairly obvious that these issues are not easy to handle, and anyone that says it is easy clearly doesn't understand the problem. How about looking through the eyes of a physicist?

Newton's First Law - An object in motion will remain in motion unless acted upon by an external force. This means that if you are moving in one direction, then the only way to change direction is to apply a force perpendicular to your line of motion. The analogy to Newton's first law is that if the country is moving towards a cliff, then there needs to be a push that will slow its motion or change its direction (either left or right). The force needs to be enough to avoid the cliff altogether, which is where Newton's second law comes in.
Newton's Second Law - A force is defined as the change in momentum with respect to the change in time (F = dp/dt = ma). This is typically written as mass time acceleration, but since politics tends to be measured in terms of momentum, the first description is better. Since Democrats are considered left and Republicans are considered right (indication of direction and not an indication of correctness), then this maps onto the analogy quite nicely.

To avoid the fiscal cliff, we need to have a change in momentum in either the left or right direction. This means that you want to consider which party has the most momentum. After the recent election, Obama and the Democrats appear to have more momentum, since they ran and won on a platform of higher taxes and moderate spending cuts. However, the Republicans did maintain control in the House of Representatives, which means that also have some momentum for their platform of dramatic spending cuts and no tax increases. Both parties have ideas to avoid the cliff, but they are very much opposite to each other, which means that the parties will essential cancel each other out and the country's overall momentum towards the cliff remains unchanged. Therefore, one party has to make concessions, but the current atmosphere in Washington is quite harsh for compromise. This begs the question, "Why is compromise difficult?"

The deficit problem that is leading to a fiscal cliff is made of two main issues: not enough revenue and too much spending. To get an idea of what this means, let's consider the numbers. According to the United States Office of Management and Budget, the current government revenue is about $2.5 trillion and current spending is about $3.5 trillion. This leaves the deficit at about $1 trillion (about 40 percent of the budget). The government has many programs, but there are three major spenders; Department of Defense (~$700 billion), Social Security (~$800 billion), and the Department of Health and Human Services (~$800 billion). Contrary to what many say, these numbers actually show that Social Security is currently paying for itself. It brings in over $850 billion in revenue (Social Security/payroll tax) each year through taxes paid for by the people and their employer. Since people actually pay into it, then it is not an "entitlement" and should not be subject to spending cuts. Also, Social Security is not a drain on the budget and is actually revenue positive.

However, this makes things even worse. That means the revenue without Social Security is ~$1.6 trillion. Therefore, with the deficit being greater than $1 trillion, that means there needs to be a cut of about 63 percent of the budget; assuming no tax increases.

These numbers also reveal another problem. Cutting the whole military or all of health and human services (Medicare and Medicaid) will not fix nor solve the problem. The leftover spending (~$1 trillion) consists of all other programs. Considered individually, they are too small to make a dent in the deficit, and it is unwise to complete cut them. Therefore, this problem needs to be solved through logical spending cuts and tax increases.

In case of deficit and debt, both parties have valid points and ideas, but both parties need to make trade offs in order to provide the push we need to avoid the fiscal cliff. Republicans need to understand that eventually all taxes need to be increased. However, in order to not hurt a recovering economy, tax increases need to start with the upper level tax bracket. However, Democrats need to realize that taxing the rich will produce less than $700 billion over the next 10 years (~7 percent of the deficit) in revenue under the current tax code, which is clearly not enough. Therefore, compromise is critical. It also brings on Newton's third law.

Newton's Third Law - For every action, there is an equal and opposite reaction. This can also be stated as: Every force produces an equal force in the opposite direction. Therefore, if the Democrats pull to the left, then Republicans are going to provide friction and pull to the right, and the net force will keep the country heading towards the fiscal cliff.

This provides an impression that we can never change direction, but if we consider the conservation laws, then compromise can help lessen friction and provide direction by minimizing opposing forces. However, this requires each side to work together and allow each other to have gains and losses, which is consistent with what Americans voted for in the recent election.

However, this country needs a serious discussion about priorities in this country. In my opinion, we need to make sure that we continue to fund education, science, and public works to keep this country great. Otherwise, what is there for the military to protect? If people think that the country will be fine by simply cutting welfare programs, then they are not being serious about the situation. It is not that everything has to take a hit and be cut, but we need to have a critical evaluation of how programs are using funds. For example, the military has practically doubled in cost since George W. Bush took office. With the Iraq war "ended" and the Afghanistan war winding down, the military should start seeing a decrease in spending. Those funds can be every help in other areas like providing jobs for veterans, increasing education for the foundation of America's youth, or simply lowing the deficit.

It needs to be mentioned that in a dynamic world, it is critical that the economy, spending, and revenue be dynamic as well. For this, I mention Grover Norquist's Taxpayer Protection Pledge. In order of the economy to be a dynamic process, there are times that taxes need to be increased. When you put in place a pledge that says that taxes must never go up under any circumstances, it is not a viable solution and will only stop the economy's heart. If you only allow for your heart rate to decrease and never increase, then you will never be able to run and thrive, because your heart cannot handle it. Sure, the economy needs to get in better shape and lose the fat, but cutting off its legs and arms won't help either.

This brings up the critical component of external forces. The individual parties are not the only entities providing forces to the government. There are other forces that have to be considered. These hidden forces consist of the special interests, lobbyists, and media that provide pressures on both parties and, in many ways, push them away from compromise. These entities provide misinformation or skewed viewpoints to benefit their own agenda, which complicates the whole process. Therefore, we need to minimize the effectiveness of these groups by being informed of the problems at hand and pushing our Congressmen and Senators to work together.

There is one other aspect that I did not mention. Since the fiscal cliff has to do with taxes, the easy solution is to simply extend the cuts for all and just leave the system alone. Of course, this would just continue the "status quo," which is not really an acceptable scenario, since it would just increase the debt and delay the talk America needs to have about what truly matters. The point of this article is to provide a starting point for that conversation. If we can take some advice from the laws of motion and understand how compromise is needed to change direction, then this country will continue to grow and thrive.