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There are two things about the fiscal cliff that make clear it is not a cliff and it is not even necessarily a problem.

First, the history of 2001-2008 already suggests that going over the fiscal cliff would not produce a significant downturn in the economy. We know this because when the Bush tax cuts were passed in 2001 and 2003 the country did not experience a great boom of growth and a jump in GDP. To the contrary the country just limped along. Well those Bush tax cuts comprise 4/5 of the revenue involved in the fiscal cliff. If cutting those taxes did not cause a significant increase in GDP growth there is no good reason to suggest that removing those tax cuts will cause any significant slump in the economy. Yes, everyone knows that the Congressional Budget Office and others have models which indicate that raising taxes reduces growth, but at what point do we believe those models or our own lying eyes.

Second, "experts" say that if we go over the fiscal cliff it will spook the markets, especially the Europeans. That makes no sense. Those are the same expert to say that if we don't get our fiscal house in order, the markets will lose faith in United States. Keep in mind, the effects of the fiscal cliff are not significant immediately, they phase in overtime. Also, the Europeans who supposedly would be spooked by the too much austerity in United States, are demanding that Greece and the other financially troubled countries in Europe do to themselves exactly what the fiscal cliff would do to us: impose spending reductions and tax increases. For the so-called market experts to suggest that the Europeans are going to be spooked by our doing the very thing that they are demanding of Greece and other countries is manifestly silly.

It goes without saying that the United States is not Greece, Spain, or any of the other financially troubled countries in Europe. We are the strongest economy in the world and we have our own currency. Unlike them, we have strength and internal capacity to manage our finances and make adjustments as deemed necessary.

There is no fiscal cliff. There is hardly even a fiscal bump or a fiscal slope. What January 2013 will bring is is a return to taxing policies that held us in good stead for almost a decade. Yes, there are some spending reductions, but in the first year, they are minor. It is time to stop the thinking that Armageddon is just around the corner.

Putting aside the substance of the matter, it is well understood that, from a public relations standpoint, we must do that is necessary to make clear to the country that any increases in taxes on the middle class are the fault of the Republicans. But we should never confuse messaging with reality.

Once we are on the other side of the cliff and there is a new fiscal reality facing the country, Democrats will be in the strongest position ever to push and enact progressive policies that will stimulate the economy and strengthen our future. Those policies will include middle-class tax relief, infrastructure spending, improvements to education, and the other things that have always made our country better and stronger, by promoting the middle class.

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Comment Preferences

  •  Tips for a return to sane policies in (1+ / 0-)
    Recommended by:
    lina

    the next Congress. We are not going to get anything reasonable until 2013.

    Further, affiant sayeth not.

    by Gary Norton on Thu Nov 29, 2012 at 10:21:46 AM PST

  •  Serious related problems (1+ / 0-)
    Recommended by:
    Gary Norton

    There are serious budget problems related to the inaction by Congress.  Among others are the expiration of many unemployment insurance benefits and the end of the current "doc fix" which would cut already low Medicare payments to doctors by 27.4%.  All this must be fixed.

    •  Yes. The doc fx will surely be done (0+ / 0-)

      early in 2013, hopefully on a more permenant basis. There is D&R consensus on this. Unfortunately, two things I suspect will not be done, the UE extension and the 2% payroll tax holiday. From what I hear both are not priority items.

      Further, affiant sayeth not.

      by Gary Norton on Thu Nov 29, 2012 at 12:34:57 PM PST

      [ Parent ]

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