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There Will be a Deal: We'll Never Reach the Fiscal Cliff, And It Wouldn't Matter If We Did
Forbes ^ | 11/18/2012 | John Tamny

Posted on 11/19/2012 6:42:05 AM PST by SeekAndFind

Supply-siders and Keynesians don’t agree on much these days, but when it comes to the alleged “fiscal cliff”, both sides are in agreement that jumping off this ledge would bring tragic economic consequences. Though a strong believer in supply-side principles, I believe even more strongly that conventional wisdom is nearly always wrong. It’s wrong here.

Before getting into why the grand assumptions surrounding the fiscal cliff are ridiculous, it’s best to explain why we’ll never reach this ranch-style house “plunge” onto soft ground. We won’t because the incentives that drive politicians ensure a deal.

That’s the case because with the economy still limping, very few politicians will want to be on record as having voted to raise rates of taxation. Every member of the House of Representatives is up for re-election in 2014, a third of all senators are, and with an eye on re-election they’re not going to vote for large tax increases. At best with taxes, they’ll compromise: lower rates in return for a reduction in economy-distorting tax loopholes.

Considering spending, though it nearly always occurs at the expense of growth, politicians exist to spend our money. That’s what animates them, and it’s true irrespective of party affiliation. The spending of the money of others is to politicians what oxygen is to the rest of us. Because spending is breath to the political class, there’s no way they’d ever allow automatic spending cuts or, “sequestration.” Repeat after me, we’ll never jump off of the “fiscal cliff”, and breathy commentary suggesting we will is written by writers who haven’t a clue about human nature.

Turning to why supply-siders and Keynesians alike are so fearful of the “cliff”, that’s easy too. For Keynesians, they’re deluded by the false belief that government spending is an economic stimulant.

(Excerpt) Read more at forbes.com ...


TOPICS: Business/Economy; Culture/Society; Government; News/Current Events
KEYWORDS: cliff; congress; debt; deficit; fiscalcliff; spending; taxes

1 posted on 11/19/2012 6:42:08 AM PST by SeekAndFind
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To: SeekAndFind

If conventional wisdom is always wrong, how does it become conventional? Is non-conventional wisdom always right?


2 posted on 11/19/2012 6:47:02 AM PST by stuartcr ("When silence speaks, it speaks only to those that have already decided what they want to hear.")
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To: SeekAndFind

There was an election and that bastard was re-elected. We lost two seats in the Senate and several more in the House.

The GOP in Congress should simply release a statement to the effect that they will not oppose ANYTHING Obama proposes economically. They will not however support it. They will abstain and the ENTIRETY of the consequences will fall on the Democrats.It will be Obama’s program and his alone.

THAT will lead to TOTAL economic collapse and then maybe the American public will realize what damn fools they are.

Its reached that point.

Elections have consequences and the electorate needs to face them.


3 posted on 11/19/2012 6:47:30 AM PST by ZULU (See video: http://gatesofvienna.blogspot.com/2012/09/the-first-siege-of-vienna.html)
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To: SeekAndFind

What kind of “limit” is it if it can always be raised?


4 posted on 11/19/2012 6:48:26 AM PST by Sgt_Schultze (A half-truth is a complete lie)
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To: SeekAndFind

Yep.

Money is no longer tied to gold or silver, and hence has no intrinsic value.

No matter how bad we eff things up, the Euros will always be ten times worse.

A number of despotic regimes in this world (Russia, House of Saud, the ChiComs) can continue to prop themselves up only by continuing to sell to the West.

Hence everyone will pretend there is no problem and the game will continue on and on and on and......


5 posted on 11/19/2012 6:49:10 AM PST by Buckeye McFrog
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To: SeekAndFind

Whereas the economic analysis in this article is correct, I have to disagree with his political assessment.

The politicians set this whole thing up such that there is no way to assign blame on anybody. The tax increases were passed two Congresses ago.


6 posted on 11/19/2012 6:53:10 AM PST by wolfpat (Not to know what has been transacted in former times is to be always a child. -- Cicero)
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To: SeekAndFind

While disclaiming “conventional wisdom” this is CW at its worst.....

Watch.....O will facilitate the cliff...then fasten your seatbelt.....

Author thinks the Dems & their Dear Leader won’t vote for tax increases? That what the campaigned and won on! “TAX those filthy rich bastards!”

BTW.....this author is predicting the future. How good at that have conservatives been in the last year????????


7 posted on 11/19/2012 6:54:21 AM PST by Arlis (.)
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To: SeekAndFind

“There is no actual solution to the fiscal cliff....”

“e have lied for more than a decade about economic progress — there has been none. It has all been borrowed and bought forward, and the ability to do that has now ended.”

http://market-ticker.org/akcs-www?post=214077

Forbes is part of the problem....


8 posted on 11/19/2012 6:57:05 AM PST by mo (If you understand, no explanation is needed. If you don't understand, no explanation is possible.)
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To: SeekAndFind
eliminating “economy distorting tax loopholes” like the mortgage deduction, favorable treatment of capital gains (earned by putting back into the economy and investing what's left of already taxed money), retirement savings, health savings and charitable giving

If they think we are stupid enough to fall for “lower rates”, then just wait until “we” see our tax bills in 2013 and 2014. And yeah the withholding for 2014 taxes will jump before the 2014 elections

and philosophically, why should this economy “favor” real estate (no jobs or taxable wealth created there, right? all those generations before us were just WRONG about that)

or private health savings or retirement savings or private support to charity or risking and investing something instead of spending it all like no tomorrow?

Let the govt handle all that

sarc

9 posted on 11/19/2012 6:57:46 AM PST by silverleaf (Age Takes a Toll: Please Have Exact Change)
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To: ZULU

I AGREE!!!!!


10 posted on 11/19/2012 6:58:26 AM PST by silverleaf (Age Takes a Toll: Please Have Exact Change)
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To: Sgt_Schultze

The only limit I can really think of is where America becomes lower than much of the third world due to our creditors being unwilling to offer up much more in loans. At that point, currency will inflate, the government will complain but continue trading, because there simply is demand by the American populace to buy the cheap, foreign products. Frankly, the days of the West ruling are coming to a close.


11 posted on 11/19/2012 7:06:31 AM PST by Morpheus2009
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To: Morpheus2009

Once the rest of the world flees our debt auctions entirely, it will be mandated that your private 401k or pension invest, say 25% of its value, in government bonds. It will be sold as making sure the portfolio includes a portion of “safe” (no interest) US government bonds. Justice Roberts has already established that the federalism can compel your purchase of a service.


12 posted on 11/19/2012 7:13:08 AM PST by Sgt_Schultze (A half-truth is a complete lie)
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To: Morpheus2009

Under your scenario Europe will reach this crisis point many years before we do. And the ChiComs and Saudis will have their “oh, shiite” moment when they realize the music has stopped and they don’t have a chair.

Some excuse to float more credit and keep the music playing will ALWAYS be found.


13 posted on 11/19/2012 7:14:00 AM PST by Buckeye McFrog
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To: ZULU

One of the consequences of the election is continuing Republican control of the House. We didn’t elect them to abstain and let the Dems roll over us, we elected them to obstruct Obama’s agenda.

As bad as the deals they’re going to make are, just giving up would be even worse. Voters don’t take kindly to temper tantrums. Especially tantrums that result in large tax increases.


14 posted on 11/19/2012 7:27:47 AM PST by MaxFlint
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To: ZULU

Democrats face a strange dilemma.

The commies at the top actually WANT a fiscal/economic collapse (so they can remake the country),
but they DON’T WANT to accept the responsibility for it.


15 posted on 11/19/2012 7:30:46 AM PST by MrB (The difference between a Humanist and a Satanist - the latter admits whom he's working for)
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To: Sgt_Schultze
Once the rest of the world flees our debt auctions entirely, it will be mandated that your private 401k or pension invest, say 25% of its value, in government bonds.

That will delay bankruptcy by a year or two, while destroying the 401k system and causing a backlash at the polls.

It's easier to continue monetizing debt, and lazy, timid politicians always choose the easy way out.

16 posted on 11/19/2012 7:33:27 AM PST by MaxFlint
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To: SeekAndFind

Deal = RINOS caving again


17 posted on 11/19/2012 8:04:56 AM PST by bgill (We've passed the point of no return. Welcome to Al Amerika.)
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To: SeekAndFind

There will be a deal. No doubt. It won’t come close to fixing the problem, of course. Neither side is serious about fixing the problem.


18 posted on 11/19/2012 8:11:24 AM PST by GeronL (http://asspos.blogspot.com)
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To: MaxFlint
It's not about the money or about delaying bankruptcy - it's always about control. The percentages will increase as need be to prop up SS and to further "equalize" the retirements of Americans.

Nobody will be left ahead. (except for our rulers)

19 posted on 11/19/2012 8:17:05 AM PST by Sgt_Schultze (A half-truth is a complete lie)
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To: SeekAndFind
With Ron Paul's impending retirement, I lament the loss of the only believable politician now serving at the federal level (the other having been Jesse Helms).

When a politician opens his/her mouth, only three scenarios are espoused

1. lying to be elected
2. lying to be re-elected
3. pandering to the party bosses for choice committee assignments.

All other blathering can be ignored.

20 posted on 11/19/2012 8:26:11 AM PST by defeat_the_dem_igods
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To: MaxFlint

Well, the fact of the matter is the public WANTS COngress to cooperate - both parties. If the GOP goes along with Obama’s plans, they will be tarred when they inevitably fail.

If they OPPOSE Obama’s plans, they will be attacked by the media AND the public for failing to cooperate with the Dems and being “obstructive”.

I think my solution allows the maximum pain to be inflicted - fiscally - by this nutjob and his accolytes and accelerate the inevitable collapse which will flush them out of power.

You see, I believe they CAN’T succeed with their fiscal philosophies. They have been tried in Russia, Greece, Great Britain, France, etc and FAILED.

So, LET THEM FAIL.


21 posted on 11/19/2012 9:06:00 AM PST by ZULU (See video: http://gatesofvienna.blogspot.com/2012/09/the-first-siege-of-vienna.html)
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To: SeekAndFind

The same human nature that said anyone who voted for McCain would not vote for 0bama. Be wary of folks who speak with such certainty about human nature.


22 posted on 11/19/2012 9:33:03 AM PST by sefarkas (Why vote Democrat Lite?)
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To: SeekAndFind

The voting public will never feel compelled to reduce Federal spending until they are forced to pay their share.


23 posted on 11/19/2012 9:33:39 AM PST by aimhigh
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