Let’s Go Over The Fiscal Cliff

The phrase “fiscal cliff” has rapidly become the most overused cliché in American politics. It’s replaced “double down” which was abused during the campaign. President Obama and Mitt Romney accused each other of doubling down on some sort of allegedly failed policy so frequently that I wondered if each man was revealing a previously suppressed desire to be a blackjack dealer in Las Vegas. Now that the election is over, the “fiscal cliff” has become the media’s latest friend.

And unlike “double down”, which often made sense in light of the point the candidate was trying to make, “fiscal cliff” is not an accurate description of reality. Here’s what it is—on January 1, if the Congress and the White House cannot agree on a deficit reduction plan, an automatic package of tax increases and spending cuts go into effect.

What some call a fiscal cliff others might call real deficit reduction in an era of divided government.

The notable tax increase is a boost in the top marginal income tax rate for 35 to 39 percent—in effect, the repeal of the Bush tax cut and restoration of Clinton-era marginal rates. The spending cuts are an across-the-board cut in spending in all programs, save Social Security and veterans benefits, which are exempt. Whether you like each individual idea or hate it, when you consider it as a package, does it really merit a term like “fiscal cliff” that implies the end of civilization awaits?

I’d say this sounds like a reasonable compromise. When it comes to the tax rates, Obama won the election and his view on this topic was no secret. Whether it’s the solution I would come up with or the GOP would come up with is really not relevant right now.

But on the flip side, the Republicans hold an expanded majority in the House of Representatives—unlike Obama, who won a smaller share of the vote in 2012 than he did in his genuine mandate year of 2008, House Republicans won more seats in 2012 than they did in their own genuine tidal wave year of 2010. The views of GOP House members on tax and spending policy are no more a secret than Obama’s and since the House is where all tax and spending bills must originate, they too have a right to a 50/50 solution. And an across-the-board spending reduction is a good place to start.

There is fear that the tax increases and spending cuts will trigger another recession, but what’s the alternative? At what point does our focus on the short-term take a back-seat to our real long-term deficit reduction needs? And the fact remains that even this “fiscal cliff” is rather modest.

The mix of taxes and spending cuts wouldn’t be exactly what I would propose. It wouldn’t be what President Obama or House Republicans would do if either party had won a governing majority. What it will do is reduce the deficit. That’s why I’m rooting for gridlock these next seven weeks and forcing the enactment of this package.

Or maybe I should say I’m doubling down on the idea of going over the fiscal cliff. That’s language our leaders could understand.

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20 thoughts on “Let’s Go Over The Fiscal Cliff

  1. iowacitydissenter says:

    While the GOP maintained their majority in the election, they actually had a net loss of a few seats!

    1. Brian A. Cook says:

      Would you like to see only one party rule this country- the Democrats? If so, then that is called a DICTATORSHIP. Think about that. You very well may get your wish.

      “A democracy is always
      temporary in nature; it simply cannot exist as a permanent form of
      government. A democracy will continue to exist up until the time that
      voters discover that they can vote themselves generous gifts from the
      public treasury. From that moment on, the majority always votes for
      the candidates who promise the most benefits from the public treasury,
      with the result that every democracy will finally collapse over loose
      fiscal policy, (which is) always followed by a dictatorship.”

  2. Robert Courtemanche says:

    Yeah, lets just push all those families who already lost one income in the Great Recession over the cliff they are just hanging onto by a thread with only one income. Higher taxes they can’t afford. Great idea.

  3. Jordan says:

    Dan, I see what you’re saying about the return to the Clinton tax rates and the automatic spending cuts. However, there are some other problems lurking behind a fall off of the fiscal cliff. Unemployment is expected to rise by 1.2 million persons if Washington can’t get its fiscal act together. Also, Moody’s has threatened a downgrade if the Congress and the prez don’t broker a deal. If the USA is downgraded, our bond yields go up and Wall Street tanks. Just letting the USA plunge off the cliff isn’t a better option than a brokered deal.

    I could see House Republicans brokering a deal like this: if Obama scraps the 4% tax hike for income above $250k, then the GOP will offer a well-thought-out plan for reforming tax deductions. Essentially, change the revenue enhancement from direct taxation to indirect taxation (i.e. reduction in certain tax breaks).

    1. The public does not support continued tax breaks for rich Americans while you “reform” the tax code to remove deductions that many middle class Americans depend on. That’s ridiculous little GOP slut.

      1. Jordan says:

        Thanks for the compliment! I did not say that we should end middle class deductions such as the mortgage interest deduction or student loan interest deduction. Rather, there should be breaks on abuses such as offshore shelters. Middle class people (and, by extension, small businesspeople) should retain every deduction they have right now.

        Personally, I think the US should scrap the progressive income tax system for individuals and small businesses. Instead, offer three low flat tax brackets and a national sales tax (VAT), with VAT rebates for lower-income persons. Federal taxation is interesting, but it isnt a topic for CV, though.

      2. carol says:

        Give me an example of what income you consider “rich” for a family living in New York City, San Fransisco, Naperville IL, Tampa Fl, Plano TX, Little Rock AR, Harlingen TX, Memphis TN, Brooklyn NY. The truth of the matter is that the cost of living varies drastically depending on where you live. A couple making $200,000 living in Manhattan may be barely scraping by verus a couple making the same amount and living in Memphis.

  4. Randall says:

    I agree. If the Republicans can force us over the fiscal cliff, it will re-tank the economy. Then everyone will know that 0bummer is a failed president with failed fiscal policies. The more people feel the hurt in their wallet, the more irrelevant he’ll become. If things get bad enough, we can impeach the failure-in-chief for destroying our economy.

  5. Republicans are blocking a deal on this to prevent the taxes on rich Americans from returning to the same level it was at under Clinton. Remember Clinton and the budget surplus? Remember when people that made their money from investing were taxed at the same rate as everyone else instead of only paying 13% like Romney?

    1. Joe M says:

      A) Welfare spending was cut under Clinton. Similar to what the Ryan plan calls for.

      B) Lowering capital gains taxes did not lower tax revenue received from capital gains taxes.

      1. Paul says:

        huh? lowering capital gains taxes did indeed lower revenue that would have been collected otherwise.

        1. Joe M says:

          Wrong. Changing capital gains taxes changes peoples investment behavior before rates are applied. As you can see, historical evidence shows an inverse relationship between rates and revenues:

          http://www.adamsmith.org/sites/default/files/resources/capital-gains-tax.pdf

    2. Bill says:

      Remember Newt Gingrich’s “Contract with America”? That’s the reason Clinton had a surplus. He worked WITH the Republicans. Clinton also had “workfare” in place of welfare. Obama changed that. Look it up.

  6. Katherine says:

    Well, just yesterday after the Union bosses started making telephone calls to certain bishops, the USCCB voted down their economic letter. You think the bishops will give you any support on this?

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