Skip to comments.Cornell expert: The 'sky will not fall' if U.S. hits the ‘Fiscal Cliff’
Posted on 11/21/2012 9:02:34 AM PST by Behind Liberal Lines
The sky is not falling.
That's according to Steven Kyle, an expert in macroeconomics and government policy, and a professor of management at Cornell University's Dyson School of Applied Economics, who offered his comments on the potential economic implications of Congress and President Barack Obama failing to come to an agreement ahead of the Jan. 1, 2013 "Fiscal Cliff" deadline.
The fiscal cliff isn't an emergency that requires most people to take immediate action," he said. "Actually, it is more of a slope than a cliff.
The "Fiscal Cliff" refers to the effect of laws that, if unchanged, could result in tax increases, spending cuts and a corresponding reduction in the budget deficit in 2013. The laws include tax increases due to the expiration of the "Bush tax cuts" and spending reductions under the Budget Control Act of 2011.
If the government cuts spending levels as of Jan. 1 while allowing taxes on the bulk of the population to rise, it will constitute a negative shock whose effects will accumulate through the year to dampen growth," Kyle said. "Many commentators have spoken of cuts of half a trillion dollars to defense spending and similar cuts to domestic budgets. What they often fail to emphasize is that these cuts would be spread over 10 years, making the effect in any one year far less, and that in the month of January 2013 even smaller.
There is no explosion or crisis that will occur as was the case with the debt ceiling a couple of summers ago when failure to agree could have resulted in a default of the U.S. government on its debt obligations," he added. "Tax increases are more substantial in percentage terms than are spending cuts but are also spread out across the year. Most people have proportional amounts deducted from each paycheck and would not see the entire tax hike all at once."
That's not to say that resolving the issue before the Jan. 1, 2013 deadline wouldn't be the optimal choice.
Would it be better to solve the problem before January? Sure. It is always better to do it ahead of time than play yet another game of chicken with our nation's economy," Kyle said. "But would the economy by substantially damaged if we didnt get it done until the end of January? No.
Have you noticed that the media doesn’t even dare to utter the word “default”?
Or when the word is mentioned, it is preceded by the word “disastrous” or “cataclysmic.”
The reason why default is never mentioned as a possibility by the Socialist media, is because default will destroy U.S. gubmint credit, making it impossible for gubmint to borrow. Maybe it would force balanced budgets for a generation?
Socialists prefer inflation, which is disguised taxation, or even austerity. But a Keynesians worst nightmare is a government unable to borrow money.
Of course it doesn’t. All the Republicans have to do, and no doubt will do, is increase the debt limit to infinity. Taxes will get increased and the middle class will continue to get soaked, all the while both sides will claim they are for the middle class and against the “rich”.
It’s Takers versus Makers, and the Makers had better wise up.
Ah! More “wisdom” from the City of Evil I see.
We’re going to hit that cliff sooner or later, and as the guy in that old Fram Oil Filter commercial said, “You can pay me now, or you can pay me later.”
You can never fix the problem if GM or the government keeps getting bailed out of their stupidity.
They also have conveniently forgotten that our country’s credit rating has been downgraded twice since the cpusa has been in the majority.
How many downgrades will we see next year?