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josie's avatar

Congress created the "fiscal cliff" when they passed the Budget Control Act of 2011. Why are they so worried about it now?

Asked by josie (22955 points ) December 6th, 2012

The law comfortably passed both chambers. So why are they so down on the terms of the law less than a year and half later. Are they ashamed of their own work now that the light of day is about to shine upon it?

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12 Answers

zenvelo's avatar

They are upset that they painted themselves into a corner. And, by putting it in to take effect after the election, each side was hopeful that the players would change. But I think the country will not let them kick it down the street for another year, but need to resolve it, one way or another, now.

Adirondackwannabe's avatar

I haven’t looked into the legislative side of it too much, but they apparently screwed themselves two ways. The budget act put some pretty steep spending cuts in place if nothing is done, and extended the Bush tax cuts for 12 months. The Bush tax cuts were for 10 years originally and they were especially generous to upper income taxpayers. So if nothing gets done, both birds come home to roost. And that’s going to hurt all around. And possibly what’s going on in Europe opened a few eyes to where we are headed if we don’t make some changes.

burntbonez's avatar

They did it as part of a deal for something else. I forget what. Probably debt ceiling raising. They never expected it to go into effect. The Republicans forced the fiscal cliff as a way to make sure they would take action to reduce the deficit. If they had imagined it would come back to bite them in the ass in this way, maybe they wouldn’t have done it. But they figured deficit reduction was a winning issue. And who knows. Maybe it will be. But perhaps not for the party that puts it in place.

Adirondackwannabe's avatar

@burntbonez GA. Interesting way of looking at it. If they don’t do anything it should reduce the deficit, plus we’ll get to see if Keynesian economic theory was correct.

BhacSsylan's avatar

@Adirondackwannabe Not sure exactly what you mean, Keynesian theory wants the opposite effect, putting money into the economy as a driver. Unless you mean if this occurs and things go south fast it’ll validate Keynesians.

Anyway, yeah, pretty well answered so far. The a supercommittee was put together to tackle the debt, with the 1 trillion in cuts to domestic and military spending acting as a Sword of Damascus to force the bipartisan committee to work out a deal, since republicans don’t want to cut the military and democrats don’t want to cut social programs. When they failed, the sequester was initiated and will now be occurring unless they work out a deal.

Add to the the Bush cuts which expire on January 1st, and you have the ‘fiscal cliff’. However, it should be noted that even if they yet again fail to fix it, no part of the cliff will have any real effect for several months after that deadline. Though Wall Street will probably take a hit as investors once again get spooked by our current congress’ inability to do anything useful.

It should also be noted that the republican’s current ‘deal’ to fix it simply takes the military cuts and dumps them into more domestic cuts instead and refuses any tax increases (their ”$800 billion in increased revenue” is not an actual tax increase, but a promise to get around to reforming tax loopholes eventually), despite their economic theory being so soundly defeated in the polls, both on election night and since. Introspective they are not.

Adirondackwannabe's avatar

@BhacSsylan Yes, if the economy tanks in a hurry it will give us an answer, although it’s going to hurt.

BhacSsylan's avatar

@Adirondackwannabe Ah, okay, i agree then. Though we do keep hearing from the right that we need to shrink the government. They seem so unwilling to take their own advice.

burntbonez's avatar

The economy is not going to tank. The only thing to pressure congress with be the stock market. If we see a severe market reaction as we come up to new years, Congress will cut a deal. No pressure from investors, and this will drag on and on.

hearkat's avatar

I don’t think they’re worried about it. I think they – and especially the media – like to keep the masses in a state of fear, and looking to them to “rescue” us from their own inability to enact true reform.

BhacSsylan's avatar

Speaking of the fiscal cliff, McConnel just filibustered his own bill dealing with the debt ceiling: http://www.nytimes.com/interactive/us/politics/debt-reckoning.html (scroll down to “Reid Calls McConnell’s Bluff on Debt Ceiling”, site is kind of obnoxious).

Yup.

wundayatta's avatar

It’s all marketing and public relations and mythology. None of this is happening very fast and it certainly won’t happen on Jan 1. Congress has lots of time to work things out. I’m not sure if the politicians are talking it up to create pressure, or if it’s the press or lobbyists or what.

But the fiscal cliff is more like a fiscal molehill, in terms actual impact. Or rather, an infinite series of molehills. Problem is, molehills don’t make for good press coverage, nor do they create an exciting bump. So they turn the molehill into a cliff, and voila! They’ve given the news organizations their headline for the next few months.

All in all, they’d probably be better off playing Parcheesi.

jrpowell's avatar

I really want to go over the cliff. The tax cuts expire and then a bill is introduced to lower the tax rate for the middle class. Let the Republicans fight it. And then let Obama bring it up every week that the GOP shot down the “tax relief bill for the middle class bill of 2013.”

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