For an exhaustive understanding of the ramifications of both stopping and allowing the fiscal cliff to occur I’d highly recommend the Wikipedia article. It’s complex, long, and not easy to process. I’m going to try to summarize why I think going over the fiscal cliff is the better choice but please read the article and come to your own conclusion.
First a quick understanding of what the fiscal cliff entails. Basically, if the US doesn’t extend the debt ceiling then, by law, a series of automatic budget cuts take place along with the end of various tax-relief schemes. These budget cuts and tax-relief abatements are projected to reduce the current level of federal debt by 50% in one year. That is not enough. Even with the automatic cuts we will continue our debt spiral just at a substantially reduced rate. On the other hand, if we avoid the fiscal cliff then we reach 100% of GDP indebtedness in 2021. That means, if there is a resolution to the fiscal cliff, the United States will owe more than the entire GDP of the nation by 2021.
It is argued that we must avoid the fiscal cliff to stop a short-term recession. This is the sort of policy that got us into a debt mess in the first place. It all started when President Reagan came into office during the Stagflation years of the late 1970’s. We started to spend our way out of every potential recession. At that time, when President Carter left office, we were $700 billion in debt. We are now over $15 trillion in debt and, even with the fiscal cliff penalties, will continue to dive more deeply into that state.
The fiscal cliff penalties involve cuts to programs everyone likes. There are cuts to the military, cuts to social programs, cuts to education, cuts to everything. There are more taxes for virtually everyone that currently pays taxes. Either we accept these hardships now or we face nastier ones down the road. One side wants more taxes and the other less spending but neither can stomach both. This nation was founded as a Representative Republic. This form of government works because of compromise. Without an absolute dictator or a super-majority it is impossible to implement dramatic change. That’s intentional. Dramatic, one-sided change is rarely long-term good news for anyone, even those forcing through the legislation.
I’m not suggesting the fiscal cliff ramifications are good news but I’m saying that continuing on our current fiscal path will bring worse consequences down the road. We will eventually face an inability to pay our debt. This will result in all the consequences of going over the fiscal cliff and more. We are simply putting our head in the sand and then patting each other on the back on what a great thing we just did. This is madness.
Sword and Sorcery fantasy with a Libertarian Twist
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