Skip to comments.About That Fiscal Cliff
Posted on 11/21/2012 5:53:23 AM PST by Kaslin
Yikes, we're headed toward a fiscal cliff! It will crush the economy! Or so the media and politicians tell us.
The "cliff" is a series of tax increases and budget cuts that automatically go into effect Jan. 1 unless Congress acts.
Will Congress act?
It will! I see the future: The politicians will meet and fret and hold press conferences and predict disaster. Then they'll reach a deal.
It will just postpone the reckoning, but they'll congratulate themselves, and the media will move on.
America, however, continues to go broke.
"They're not going to admit that we're bankrupt, and they won't admit that we're on the verge of a major, major change in our society," says Rep. Ron Paul, R-Texas. "So they'll keep putting it aside, but then we'll eventually probably destroy the dollar."
The across-the-board cut, or "sequestration," was designed to be so distasteful that Congress would be moved to cut more deliberately. If it doesn't act, $110 billion in projected spending will be automatically cut -- half from domestic spending, half from the Pentagon.
"They assume that they made it so bad that they wouldn't accept it, but I don't think they did," said Paul. "They're not even ... talking about real cuts. They're talking about cuts in baseline budgeting."
Right, the old baseline budgeting trick.
"If they propose, let's say, a $10 billion increase for next year and cut it down to $9 billion, they say they're cutting 10 percent. But they're not cutting anything, they're only increasing it $9 billion instead of $10 billion. It's done on purpose so that people get confused."
Republican House Speaker John Boehner calls the fiscal cliff a "nightmare."
But why? Trillion-dollar deficits are more terrible.
Cuts of $110 billion would even be good for us because it would keep money in private hands, away from the bloated and freedom-killing bureaucracy.
"When government spending is about $3.8 trillion, you're going to cut $100 billion? That's a deck chair on the Titanic," said Russ Roberts of the Hoover Institution. "If they're actual cuts, I think that would be great. I'd cut 10, 20 percent across the board if I had my druthers. But across the board scares people because they think, 'Let's save the things that are really important and cut the things that are not so important.' (But) that never works."
It doesn't work because every cent in the budget is absolutely crucial to someone.
Lately the media are focused on the $400 billion in tax increases that make up four-fifths of the fiscal cliff. We're told that if the Bush-era tax rate cuts expire and the spending reductions kick in, catastrophe will follow.
"The tax increases sound scarier. But we have a trillion dollar deficit!" Roberts pointed out. "So to me, the idea of raising taxes is probably a good idea. It says this spending that we've been doing is not a free lunch."
I'm not convinced that giving politicians more money is ever a good idea.
And won't the wealthy high-earners find a way around the higher rates? When rich people do that, much of their money goes to lawyers instead of consumer satisfaction.
The other thing that scares Washington are the automatic cuts to Pentagon spending. "These draconian cuts represent a threat to our national security," say Republican Sens. John McCain of Arizona and Lindsey Graham of South Carolina.
"The Pentagon is hysterical about it," notes Ben Friedman of the Cato Institute. "But it's about 10 percent, which would bring us roughly back to where we were in defense spending in 2006 ... adjusted for inflation, not exactly a crisis year in the Pentagon. They've gotten very spoiled at the Pentagon. They had years of luxury."
Automatic cuts might even be good, said Friedman.
"We need probably bigger cuts in the defense budget because we do too much. This will force us to make some choices. We try to be everything in the world ... pretending that every unstable country is a threat to us."
I won't lose sleep over automatic spending cuts. The "fiscal cliff" frightens me less than the bankruptcy cliff.
This is just "code" for "yup, I'll make a deal with the Democrats and call it a win for the GOP".
When Romney campaigned on the economy he talked about creating jobs. He should have talked about saving our way of life from Obama who is a dangerous radical. We understood we needed jobs to generate GDP so that we can grow our way out of the debt crisis which might have been possible if we had been willing to cut government spending to the bone. Now that Obama has won, taxes will go up, jobs will fall, revenue will fall with GDP, and we will plunge over the cliff.
We understood this all along. The left does not, would not, and will not. Romney would not campaign on it.
Many of us commented on this campaign lapse at the time but we also assumed that Romney knew what he was doing, especially after the first debate. We assumed that he was being informed by his focus groups and by his internal polling. We now have reports that Romney himself was utterly surprised at the results of the election. We have heard that his advisers were using him only to fleece him of money. We have heard that they were Rinos who cannot be trusted to deliver a winning conservative message. Whatever the reason, it simply was not done.
So not only do we have a failed campaign that did not campaign on conservative social values, it did not really even campaign on conservative economic values. In a sense, Romney's campaign was another kind of government welfare: I will get you a job. The bedrock conservative message is that liberalism is destroying us and must be halted and the economy will give you that job if it is allowed to live.
It’s not even a cliff. It is a wall, a fiscal wall. Let’s hit it and slow the train down. Imagine if government spending stayed flat for a dozen years. We’d have 2006 spending (per the Pentagon example) until 2023. America wasn’t starving in 2006.
It would also disabuse the pro-inflationistas in government as they’d be cutting their own budget. I like it.
It was recently reported http://www.foxnews.com/politics/2012/10/18/welfare-spending-topped-1-trillion-in-2011-study-shows/ that welfare, when all types are added up, is a little over $ trillion.
This amount does NOT include Medicare or Social Security.
Of course, it is quite close to the amount of annual deficit.
A President who was doing his duty would permanently end all that spending by Executive Order, and let Congress wrangle over that. The economy would start doing so much better so quickly, the order would stand.