Fiscal "Cliff"

So, here we are, supposedly headed for a "fiscal cliff" and yet my impression is that few people really understand what that means.

The thing is, this is yet another case of the right successfully branding something relatively benign with which they disagree in a way that makes it seem horrible and terrifying.  "Death tax" and  "Socialist Health Care" are two other recent examples.

But here's the thing...  our "fiscal cliff" is really more of a bump in the road.  It consists of two major categories:

1) Some tax increases due to the expiration of some "sunsetting" tax cuts and the implementation of some new taxes.

2) The automatic slashing of the budget for a number of programs due to the failure of the "Super Committee" to come to an agreement on deficit reduction.

The second of these is stupid, and is why I have opposed "balanced budget amendments" and the like in the past.  If you can do something, do it.  If you can't do something, don't think you're accomplishing anything by passing a rule that says you have to, even if it imposes stiff penalties if you fail.  Because what ends up happening is what's going to happen here:  you'll pay the penalties.

The second one is by far the more onerous problem for the United States, being that it would impose something like the austerity measures which have been such a stunning failure in much of Europe.  At a time when the cruise ship of the economy is slowly beginning to respond to the turning of the rudder, now is absolutely not the time to throw the anchor overboard.

But the key to it is that this was a law.  As with so many other laws, it could be fairly simply repealed by the Congress if they so chose.  And this is a poison pill of Congress' making, the talk of the "cliff" being designed to influence the President, holding hostage the American public and our economy in order to force capitulation by the President.

But guess what:  this President isn't running again.  He doesn't need to try to stay popular.  He needs to do what's right for the country.  And cutting spending drastically at this time is not in anyone's best interests.

And by the way, what could the President do to avoid this "fiscal cliff"?  The only thing he could do would be to agree to not raise tax rates which are already almost criminally low in our country, and to agree to many of the same tax cuts which will go into effect if the "sequestration" spending cuts go into effect.  So really, where is the benefit to capitulating, if we're going to get those highly damaging spending cuts one way or the other, and at least without capitulating, we also get a bit more tax revenue coming in.

To the first point, the only part of the cliff that's bad is the increases of taxes on the lower and middle class, the people who will actually spend the money they'll lose.  The rich, who will mostly just inflate their bank balances if tax cuts are extended, will do nothing with that money to stimulate the economy, and as we've gone over before, there is zero chance that the rich will go out and create jobs with more money, unless there is a greater market for their product.

It's simple economics:  If someone wants to buy your product at a price point where you can make money on that product, you'll find a way to increase capacity in order to manufacture that product.  If no one wants to buy your product, you aren't going to increase capacity just because you have a few extra dollars, you're just going to pay higher dividends and increase the corporate bottom line.  Wealthy people and corporations do not create jobs.  Demand for products and services creates jobs.  Wealthy people and corporations merely capitalize on that demand.

We need some increased taxes.  Our current extreme deficit problem is a direct result of our tax rates being cut below the level that they really ought to be while failing to recognize that going to war has always required some financial sacrifice on the part of the population.

So, to sum up, let's go over the cliff.  This is a case of terrorism, a case of kidnapping.  You can't negotiate.  It may seem like the right thing to do, if we just negotiate we can prevent this horrible damage.  But what you do if you capitulate to any demands is set up a situation where, while avoiding ONE crisis, you demonstrate to the perpetrators that the way to get you to behave the way they want you to is to threaten more terrorist acts.

If kidnapping never resulted in ransom being paid, the number of kidnappings for money would go down, because what would be the point if the act NEVER paid off.  If kidnappings routinely resulted in huge payoffs and rarely resulted in prosecutions, the number of fiscally-related kidnappings would go up.

The President just won.  The Democrats increased their numbers in the Senate and reduced the majority of the Republicans in the House.  By all measures, this election was a win for the Democrats.  It is the Republicans who should be making concessions and reaching across the aisle.  If they don't, let them drive us over the cliff.  Let them shut down the government.

The result will not be nearly as negative for the President or the Democrats as capitulation would be, and the results for the country as a whole will be far better than giving into more failed economic theories which really only serve to line the pockets of the already lucky at the expense of the unlucky.

And that shouldn't be how a compassionate country behaves.