14 thoughts on ““There Is No Fiscal Cliff”

  1. wodun

    There is a fiscal cliff but it isnt sequestration as the media is claiming. Republicans want cuts and Democracts want taxes, both happen in sequestration and both will happen with any grand bargin. Sequestration doesn’t do enough to reduce deficits and any bargin should actually do more, so that will be going off the cliff according to the media.

    The media is pushing for something less than what will happen in sequestration and that wont address what the real fiscal problems are.

    I guess one could argue that the media wants bigger cuts and tax increases than what is in sequestration but then it wouldn’t be a fiscal cliff, just a step in the right direction.

  2. Peterh

    Will congress:

    - raise tax rates, crashing the economy and not gathering the revenue expected?
    - borrow more, until the credit rating crashes and they can’t borrow more?
    - print more money, until the dollar becomes worthless paper?
    - force spending cuts, facing Greece style riots?
    The House has the power to block the first and second. With the money supply in the hands of the “independent” federal reserve, printing more and giving the worthless credits to government might be difficult.

    1. Godzilla

      Print more money of course. It even makes the government debt go away as the currency becomes worthless.

  3. Mattm

    I am so relieved that we are not really facing a fiscal cliff that could bankrupt the country.
    Just like the employees of Hostess are now relieved that they won’t have to face an 8% paycut or bankrupt the company. (They negotiated really hard to get that 100% paycut they felt they deserved.)

    1. Jim

      I am so relieved that we are not really facing a fiscal cliff that could bankrupt the country.

      This is an unfortunately common misconception of what the “fiscal cliff” is about. It’s a poorly named collection of tax hikes and spending cuts arriving all at once. The thing going off the cliff is the deficit, which, unless something is done, will be rapidly reduced.

      If you subscribe to Keynesian economics, you believe the economy will go off a cliff as well, as a demand-starved economy like ours at the moment needs higher deficit spending, not lower, to make up for the weakness of private sector demand. Non-Keynesian deficit hawks should be rooting for the cliff.

      It has been suggested that “austerity crisis” or “austerity bomb” would be better names than “fiscal cliff”, because they convey the idea that it’s our economy, not our fiscal situation, that is threatened. But they, too, exaggerate and distort the nature of the problem. When you fall off a cliff, or a bomb goes off, there’s no going back. The tax hikes and spending cuts in question, however, take effect gradually, and can be reversed. Obama and Congress can make a deal in February or March, make it retroactive to January 1, and undo most of the economic damage.

      In fact, it would politically be better for them to wait. Anything they do on taxes today, short of an extension of every expiring tax cut (which Obama has ruled out), will look like a tax hike. After January 1, anything they do looks like a new tax cut. Waiting lets everyone in the House run in 2014 as having cut taxes, and they all love to do that.

        1. Jim

          You’d expect everything to be higher than it was 5 years ago, and there’s more to demand than retail sales.

      1. Bob-1

        “After January 1, anything they do looks like a new tax cut. Waiting lets everyone in the House run in 2014 as having cut taxes, and they all love to do that.”

        That was quite funny! Thank you for cheering me up.

      2. wodun

        Jim, by only raising taxes on the rich by $80b a year, while increasing spending, and hoping for growth by funneling money to politically aligned cronies, the deficit will never get under control. At some point we must pay the piper.

        Some distant day in the future, the economy will recover but how will we get rid of the debt you want to rack up?

        1. Jim

          how will we get rid of the debt you want to rack up?

          The same way we did after WWII: with a growing economy, the debt will decline as a fraction of our GDP.

          1. ken anthony

            Growing the economy is working so well. How did Mitt put it? This year growth was half of the year before; Which was less than the year before that; Which was less than the year before that; …

            It could happen. It wont.

          2. M Puckett

            If you wanted to grow the economy, you voted for the wrong guy Jim. You voted for the ‘lets be fair and share’ guy, not the ‘rising tide lifts all boats’ guy.

  4. Der Schtumpy

    Mattm,
    but did you hear that the Teamsters Union is asking the baker to ACCEPT the 8% cut? Who woulda thought truck drivers and loaders could do enough math to figure out that 92% of “X” value is more than 0% of “X” value?

    I saw a new bit this morning where the oped guy was savaging Hostess as ONLY being interested in breaking the union. The BASTARDS!

  5. Der Schtumpy

    Make that, ‘bakerS to accept’, above. I’m pretty sure it tales more than one person to make ALL the Twinkies.

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