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ETpro's avatar

Should the US go off the fiscal cliff?

Asked by ETpro (34415points) November 18th, 2012

This question builds on this one of 4 days ago. Refer to @wundayatta‘s question for more details about the deal that established the now looming fiscal cliff.

And before we begin, let’s dispense with the disingenuous argument that this or that proposed solution won’t solve the entire debt problem. No single solution will do that. This year’s deficit is a record $1.4 trillion, and we simply do not have a $1.4 trillion line item in our budget. The largest single line item, Defense, is a paltry $728 billion, about half of the problem even if we took the insane action of completely eliminating the Defense Department. So criticizing proposals because they don’t single-handedly address the entire problem is just political Newspeak for doing nothing.

Even more interestingly, the very same politicians who pooh-pooh taxes on the rich resetting to their 1990’s levels because that alone doesn’t solve the problem are perfectly happy putting forward “solutions” like eliminating the Department of Education, which accounts for less than 1% of the Federal budget.

Let’s get real. We need to focus on solutions, and solutions will not be found in a single bumper-sticker answer because a single-line-item answer doesn’t exist. Also, I believe we should seek solutions that do the least possible harm to the most financially vulnerable among us, and to the nation’s economy. And solutions will have to include revenue increases after 30 straight years of slashing taxes. Solutions will also have to include spending cuts. We are currently spending at a rate the tax revenues would never be able to sustain.

As the chart in the link directly above shows, with all the tax cuts and special interest breaks Congress has bought our votes with, the US is now collecting just over 16% of GDP in taxes, the lowest revenue level since 1959. Of course, in 1959, we did not have Medicare or Medicaid. We did not have an unfunded prescription drug benefit.

The problem in looking at taxes is that virtually all GOP Congressional members have signed a pledge to Grover Norquist, the lobbyist in charge of Americans for Tax Reform. They have sworn to Grover they will never raise taxes, or even cut deductions without offsetting tax rate reductions. Presumably, if we are attacked again like we were at Pearl Harbor, we should just go down in defeat rather than raise revenues to pay to rebuild our tattered military.

Can a representative or senator reconcile their oath of office and the recitation of the Pledge of Allegiance with such a pledge to an unelected lobbyist? But that’s a separate question.

Still, given the Norquist pledge, GOP lawmakers might refuse to negotiate any deal with Democrats unless it is revenue neutral and balances the budget on the backs of the poor and the middle class. The GOP insists the Defense Department budget is off the table. In fact, they want to increase defense spending.

But we could just go off the cliff. Then those same GOP lawmakers could cut taxes back to their current rate for 98% of Americans and 97% of small businesses. This wouldn’t involve reneging on their pledge to the almighty Norquist. And even Grover knows that after Obama’s campaign promises to the voters who elected him, the President will not likely sign a tax cut for the top 2% into law. So is the cliff all that frightening? Perhaps we should view it as a perfect way out. What say you?

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18 Answers

wundayatta's avatar

If I were a betting man, I’d say the odds are that we won’t go off the fiscal cliff. But it is very close. Things could easily go that way. It would give a lot of stupid politicians cover. And that’s probably why they passed it in the first place.

But I think that at the last moment, Obama and Congress will announce a deal. There. I said it. I’m on the record. We’ll see what kind of pundit I would make.

Now the deal could be something like stopping the clock to give themselves more time, or some other parliamentary move that pushes back the time line. They do, after all, have the power to make laws. Any laws at all. Except unconstitutional ones. But I’m saying the fiscal cliff will not be fallen over. At least, not this looming cliff. Some future cliff or some pushed off cliff is not what I’m talking about. Just this most immediate one.

filmfann's avatar

Let’s pretend that we all elect really smart members of Congress, and really smart Senators.
Each Representative and each Senator find $1,000,000 in cuts every day. That’s 435 Reps and 100 Senators each finding a different million dollars in cuts every day. Let’s pretend they do this every day for a year. That’s $195,275,000,000 in savings for one year. It would take 8 years of that to cut $1.4 Trillion.
We are so screwed.

marinelife's avatar

Certainly not. There is no reason to except Congressional partisanship.

DrBill's avatar

There is no doubt we will go over the cliff. It is a great political advantage to the president and congress.

To go over the cliff, congress has to do nothing, and doing nothing is what they do best.

They will let the tax cuts expire at the first of the year, then twenty days later when all the new congressmen get sworn in, they will propose a tax cut, but not as much as are in place now, so Obama and congress get the tax increase they want and they get to “claim” they are responsible for cutting the taxes.

Of course we will know it is a lie, but that is consistent with politicians already.

Jaxk's avatar

I don’t see a good resolution on the horizon. I believe that compromise will be reached but I don’t think it will fix anything. Republicans believe that raising taxes during a recession will hurt the economy. Democrats believe that raising taxes on the rich won’t hurt anything, that somehow this is a special group that has no impact on the economy. So they will reach a compromise that neither side can claim success nor failure. The economy will continue to stagnate and democrats will continue to say we aren’t spending enough while Republicans will say we taxed too much.

Obama has made it clear that he wants another stimulus. I expect him to get it and that will wipe out any spending cuts we may have agreed to. More than likely the spending cuts will be somewhere down the road so the net affect will be another jump in spending and the associated jump in deficit and debt.

There are indications that we may pull out of this due to market forces but I don’t hold a lot of hope. The gas and oil being found could turn this whole thing around but there are equal indications that we won’t let it happen. The key to getting us out of this funk is to grow the private sector economy. Obama is intent on growing the public sector so I don’t see much room for the private sector to take off.

YARNLADY's avatar

I’m with @DrBill on this one. There are already secret meetings going on to work out the details of the “new” proposals, and a lot of new congressional representatives to indoctrinate.

PhiNotPi's avatar

Personally, I predict that a deal will be thrown together in the last few days before the cliff, but which creates a new and almost identical cliff next year.

janbb's avatar

I find this whole idea of the “fiscal cliff” so ridiculous. Ooh – surprise! We never saw this coming!

Who’s been minding the store?

PhiNotPi's avatar

@janbb The cliff has existed for quite a while now, over a year I think. Congress seemed to think that its existence would force them to make gradual changes to balance the budget, and that hasn’t happened.

ETpro's avatar

@wundayatta If I were a betting man, I’d take that bet but only at even odds. The Great and Powerful Grover could change the game by releasing his minions just this one time. But that would show a rational chink in his entirely ideological armor, one I doubt he’s willing to display—and may well be intellectually incapable of managing. So long as the Great and Powerful Grover stands ready and able to finance a multimillion dollar primary challenge against any Republican who fails to do His bidding to the letter of His law, I’m guessing that the GOP will hang tough on their pledge not to raise taxes ever. Taxes will thus go up automatically, and they can then play hero cutting them. They could do one cut for the 98% of working stiffs and the 97% of small businesses that earn under $250K ($200K if filing singly), and a second one for the top 2%, leaving it to the Senate or the President to kill that.

I think the worst possible strategy would be to simply kick the can down the road one more time. Financial markets would not take kindly to that. They’re at a point where they really want some predictability going forward. And even if that predictability doesn’t come till late January, the economy should weather the turmoil reasonably well then rebound once it’s all resolved.

@filmfann What you are leaving out of the equation is the resilience and inherent strength of the economy. With some reasonable adjustments to get revenue to GDP back in the 18 to 19% range where it belongs, any breakthrough technology such as cheap, renewable energy or cures for most diseases could blast us right back up to collecting nearly what we are currently spending. We’ll also soon reap the savings of ending the longest war in US history in Afghanistan. That’s cost us $585,875,092,428 and counting according to Cost of War. The US debt is currently closing in on 100% of GDP. At the end of WWII, it was 120% of GDP and that led to the largest, most sustained economic boom in US history, a time we used to pay it down to very manageable levels. Consider that when the housing bubble burst, US private debt was 300% of GDP and nobody was obsessing and hand wringing about that.

@marinelife Ha! History certainly isn’t any guide.

@DrBill There is no doubt we will go over the cliff. It is a great political advantage to the president and congress. I totally agree.

To go over the cliff, congress has to do nothing, and doing nothing is what they do best. Agreed… strongly agreed.

I think you’re likely spot on. I’d love to see a bipartisan agreement, but doubt it can happen given the forces opposing it.

@Jaxk Obama didn’t campaign on pushing through another stimulus, Mitt Romney campaigned against the fictitious stimulus he claimed the President wanted. The only thing close to a second stimulus that’s really been discussed is ramping up block grants to the states so they can rehire teachers, firefighters and police officers they have had to lay off. Overall government employment hasn’t really skyrocketed, it has tanked. But that’s the real world. I’m sure fantasy land is a much more satisfying place in which to maintain your ideological “truths”.

@YARNLADY I’m with @DrBill on this one. Me too.

@PhiNotPi I hope you are wrong. We need to get this uncertainty out of the way before any real recovery is likely to take hold.

@janbb I find this whole idea of the “fiscal cliff” so ridiculous. Ooh – surprise! We never saw this coming! Wow, how true. And our Congressional Representatives are supposed to be the best and the brightest we have.

Who’s been minding the store? Grover Norquist would be high on the management chain. Unfortunately, since he has never been elected to anything, We the People can’t fire him.

@PhiNotPi Maybe they realized that the cliff would provide them a way to address both revenue and spending. But with the Great and Powerful Grover’s pledge, going right over the Fiscal CLiff then bootstrapping back up is the only way it can do that.

ETpro's avatar

This just in today. The Great and Powerful Grover says Obama will have no choice but to extend ALL of the Bush tax cuts because Republicans won the tax debate. I hereby nominate Norquist for the picture to put beside “delusional” in the next edition of the dictionary. If ever we needed an example of dwelling outside the fact-based Universe, Grover’s rant is it.

Oh, and here’s a good analysis of what went wrong. Pay particular note to the Tom Toles cartoon capturing it.

janbb's avatar

@ETpro I see it as another example of Republican scare tactics and obstructionism. Not that there isn’t a problem but that it could have been being dealt with all along.

Jaxk's avatar


I’m not really interested in another general fantasy argument over who has any contact with reality. Obama has constantly argued for more Green energy support (ie more subsidies for wind an solar). He wants the block grants increase public sector. He has increased federal employment significantly. He still wants the infrastructure projects. when you add all this up it is another stimulus. Just because he doesn’t use the word makes it no less true.

I’ll admit that after the election, win, lose, or draw, I was hoping we’d get back to trying to get things moving. I can see that was a pipe dream. We still have the same old rancor but now with a substantial amount of chest beating in the process.

josie's avatar

It is interesting that Congress easily passed the legislation that created the “fiscal cliff” and now that they have to confront the consequence, they act like it should never have happened. What assholes.

Given a trillion + deficit and a debt of at least 14 trillion (I have actually lost track of the debt) I would say going over the cliff has everything you need. Higher taxes, less spending.

The only thing left is print more money to pay back the debt with inflated dollars, but that happens anyway, so it sounds like what the doctor ordered.

I understand the concern that people will thus be spending less money and the economy will thus further recede, but given the government’s liability, that is a reckoning that is inevitable. It seems only fair that the people who caused this problem (the Boomers and their children-you and me) should be the ones to face the reckoning. Speaking of the Boomers-what can you say about a generation that spent their parents wealth (the so called Great Generation) then borrowed more to keep the feel good fun happening?

But who said anything about fair? I bet it will be MY kids that face the reckoning, and it will be worse by then. Pretty shameful stuff if you ask me.

janbb's avatar

@josie I agree 100% with your first paragraph.

josie's avatar

Thanks for that and GA.
Around here, I regard people agreeing with me as a special event. Even if it is only one paragraph.

ETpro's avatar

@janbb GA. How true.

@Jaxk Yes, yes, claim you don’t want to talk about it, then do just that. Now that’s solid evidence of connection to the fact-based universe… NOT!

@josie Shock of your life. Another GA and agreed.

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