Going Over The (Fiscal) Cliff!

Posted: December 2, 2012 in Current Events, Politics
Tags: ,

thelma-and-louise

I don’t claim to be an economy expert, but here’s what I believe to be true about the so-called fiscal cliff crisis:

  • If nothing is done, going over the “cliff” will probably be bad for the economy…….over the long-term.  But it’s not like the economy is going to instantly tank on January 1st.  So there’s really more time to do something than 30 days.
  • Republicans don’t really care if taxes go up for the middle class.  If they did, the current rates would have already been extended.  Republicans say they don’t want taxes to go up for the middle class.  The Democrats agree.  So if that were the case, a bill should pass nearly unanimously.  That it doesn’t means that’s not really the Republicans priority.  At best, Republicans at least think tax cuts for the richest Americans are much more important.  I think reasonable people can disagree on a wide range of issues, but I can’t see how this really can be disputed.  (Granted, you could also argue that Democrats think that tax hikes on the rich are more important than extending current tax rates for the middle class.  To be fair though, we just had a national election where President Obama promised to raise taxes on the richest Americans, and he DID win the popular vote.  So what the will of the people is here should be clear.)
  • Serious entitlement reform deserves much more time for discussion and debate than what will be available in this last month for a lame duck Congress.  Programs like Social Security and Medicare need tweaked, but once again these are long-term problems.  Neither Social Security nor Medicare is going to go broke on January 1st.  Since these programs impact ALL of us, any decision regarding major changes shouldn’t be rushed through to meet an arbitrary deadline.
  • Speaking of which, solutions that sound too simple to work probably are.  A common solution you hear proposed is raising the eligibility age for Medicare to 67.  According to the CBO, that would create savings of $113 billion over the next decade.  That sounds like a lot, but when you consider that the 2012 deficit is $1.3 trillion and the national debt is over $16 trillion, saving $11 billion a year or so is nothing.  (Congratulations, by reducing benefits to old people, you have solved 1% of the deficit!  Woohoo!)  Also, such a plan would increase the cost of Medicare for participants, as you would be removing the younger, and thus healthier portion, of the pool, leaving the more costly participants in the program.
  • We need to start getting to used to the idea these popular programs cost money.  So we just might have to pay just a tad more in taxes.
  • The so-called “cliff” was completely manufactured by Congress.  Congress could cancel it tomorrow if they wanted.
  • It should be no surprise that Congress is not behaving any differently now as they have the past 4 years.  The bad news is that even after the lame duck session, the players are largely going to be the same, so there’s no reason to think things are going to get better.  At best, we are going to get at least 2 more years of this.  But realistically, thanks to Congressional district gerrymandering, there’s no reason to think that the election in 2 years will change much either.  So I think we are stuck with this crap for a while.

I may be wrong, but I tend to think that it may be best to just go over the “cliff” and then start fresh at the beginning of the year.  Maybe when the tax hikes and spending cuts are actually enacted, public pressure will be exerted that will lead Congress to at least do something more effective.

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Comments
  1. List of X says:

    I agree, it’s not a cliff for an economy, more like a gradual turn, but it’s still a cliff because the tax rates go up immediately, and spending cuts have to be applied immediately, whether or not they solve anything in the long term.

  2. Totally agree. Thanks for getting it out there.

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