November 11, 2012 by David K. Sutton
The ‘Fiscal Cliff’ That Isn’t
On today’s Up on MSNBC, Chris Hayes said if the debt and deficit were really a major concern in Washington, we would not have a debate framed around a fictional “fiscal cliff.” Hayes said that it is neither fiscal or a cliff. At best it’s a fiscal curb, but even that isn’t correct because on the fiscal side, the “fiscal cliff’ is actually a major dose of austerity.
What is the fiscal cliff? It’s the expiration of all Bush tax cuts, the expiration of the payroll tax cut, and around $1 trillion in spending cuts. If this fiscal cliff were to happen on January 1, 2013, it would mean a MUCH reduced federal deficit. If we are to believe, as Republicans say, that the deficit is a problem we need to address immediately and that the deficit is a drag on the economy, then I ask, what’s the problem? From a Republican perspective, why are we even having a fiscal cliff debate? If they really believe the deficit is that much of a problem they should all happily walk right off the cliff. Right? Well, no, because it means tax increases, and that is a big problem for Republicans, and don’t think for a second that it’s for the reason Republicans state.
The combination of the increased taxes and spending cuts could be a major drag on the economy in 2013, but this would not happen immediately on January 1st. So the reason the fiscal cliff is not what it seems is because it’s actually an economic cliff, but better yet, an economic curb. On fiscal policy, this economic curb is quite sound. On economic policy, not so much. But the effects on the economy can be mitigated even if we step off the economic curb on January 1st assuming a deal can be struck early in the year. If that is what is required to get sensible fiscal tax policy then so be it.