Skip to comments.The One Single Reason Why We're Going Over the Fiscal Cliff
Posted on 12/20/2012 9:04:51 AM PST by Zakeet
Im going to lay out everything you need to know about the fiscal cliff negotiations. After reading this, you can ignore all of the medias coverage of this topic as well as various politicians announcements pertaining to this subject.
All you need to know consists of just one sentence.
Politicians are in charge of this issue.
These are the same folks who havent even produced a budget in four years. The same folks who have run $1+ trillion deficits for four years. The same folks who rarely if ever leave office as a result of their fiscal mistakes.
In simple terms, none of the people in this group will likely suffer any consequences if we do go over the cliff. Indeed, as far as options go, their best option would be for us to go over the cliff and then implement some targeted tax breaks in late 2013 early 2014 as they go into the 2014 Congressional elections.
Lets take the side of the Democrats.
Obama was largely re-elected based a solid turnout for the Democrats and a lack of voter turnout for the GOP. If you want to argue about voter fraud the fact remains that if there was widespread voter fraud the GOP let the Democrats get away with it. So for simplicitys sake, Obama won based on a strong turnout while the GOP lost based on a weak turnout (Romney took less votes that McCain!).
With this in mind, Obama and the Democrats can easily argue that they have the mandate of the people for their policies. If the GOP proves unwilling to go along with their proposals, Obama and the Dems can simply take us over the cliff, increase taxes on the wealthy (which would appease their voting base) and blame the failure to reach a solution as well as the ensuing economic mess on the Republicans (much as the Dems and Obama have blamed the terrible economy on Bush).
So, truth be told, Obama and the Dems really have very little to gain politically from solving the fiscal cliff.
On the GOP side, there is little incentive to solve the fiscal cliff either. If they kowtow to Obamas wishes, theyll infuriate their base. And theres no chance that theyll convince Obama and the Dems to meet their demands of cutting spending (they sure havent done anything of this nature in the last two years). So the best thing they can do is simply refuse to address the problem, go off the cliff and then maintain a we fought the best we could against insurmountable odds stance.
So neither the Dems nor the GOP are incentivized to solve the fiscal cliff. Both parties are best off from a political standpoint having us go over the cliff and then fighting for some kind of tax breaks/ tax relief for their bases sometime in late 2013/ early 2014.
With that in mind, were very likely going over the cliff in a months time. The whole situation has echoes of the failed debt ceiling talks and subsequent market collapse of 2011.
Indeed, the market is even mirroring its Debt Ceiling talks action:
Heres the S&P 500s recent action:
Heres what the market looked like going into the Debt Ceiling talks of 2011.
Heres what followed:
I highly suggest preparing in advance.
The one single reason why we are going over the fiscal cliff ... politicians are in charge of the issue!
A bigger reason than that, the tax cuts were passed in 2003 using budget reconcilation which puts an automatic expiration date on them.
1) They couldnt get 60 in the senate to pass it so they took the shortcut above
2) it was not CBO scored as deficit neutral, if it was neutral then it wouldnt expire
The fiscal cliff at the end of the year is just a speed bump compared to the real fiscal cliff that is looming.
Wrong,Obama is a sociopath,rich this rich that,the guy is a mental case with nuclear weapons at his disposal and we are the elementary school
Socialists are in charge of this issue.
"Everything about socialism is sham and affectation. 23.11 Ch23 Evil; Economic Harmonies; Frederic Bastiat
"Socialism Is Legal Plunder" - The Law; Frederic Bastiat
BIG GOVERNMENT IS CRONY SOCIALISM