The Fiscal Cliff: Same as it Ever Was

August 23rd, 2012 at 12:22 pm

As per yesterday’s CBO update, there’s been a boomlet of page-A-1-above-the-fold stories on the serious risks to the economy of going over the fiscal cliff.*  That’s true—the US economic bicycle is already too wobbly to sustain a $500 billion fiscal contraction over the course of 2013.

But that’s the thing these articles are leaving out: the recession scenario assumes you go over—and stay over—the cliff.  If it takes going over to get a responsible budget deal—one that quickly reverses the impact of the tax increases and spending cuts (see video clip below–watch the whole thing)—the result will be a lot better for our fiscal and economic future than another can kick to another super committee.

*To be fair, the CBO slightly deepened the recessionary impact of the cliff in this report relative to their earlier one.  Their downward revision for 2013 “…primarily reflects two factors: One is the agency’s reassessment of the underlying strength of the economy heading into next year.  The other is that the fiscal tightening that will result from current law in 2013 is larger than previously estimated…”

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2 comments in reply to "The Fiscal Cliff: Same as it Ever Was"

  1. David A. Spitzley says:

    How long after the cliff do we have for action, though? If the lame duck congress decides to give Obama the big FU, we would presumably have to wait until the next one is sworn in early in January. It seems likely that it would take another couple of weeks to pass corrective legislation, so we’re talking about 4 months post-cliff.

  2. Misaki says:

    Top demographics

    Male, 55-64 years
    Female, 45-54 years
    Female, 55-64 years

    Political videos are always like this…

    I am lazy so I will just repost this comment:

    The public cares about the deficit; it’s just that perceptions toward it are influenced by “confidence” toward the chances of economic recovery and job creation in the short term.

    If the President says that the economy is getting better (see: spring of 2011), then it’s logical for the opposition party to focus on deficits.

    Now it’s clear the economy hasn’t gotten much better other than people dropping out of the work force, and both the President and the architect of the Obama economy have admitted this, so it’s fair for the opposition party to say that deficits are no longer an issue.

    [spam filter]

    Neither side gets any points, because the public loses no matter which party wins in the elections with the way things are going.

    And the way things are going of course: LOSS for Democrats, WIN for Republicans, WIN for everyone who gets paid to think about this stuff (like Congresspersons), LOSS for the public who have no jobs and low wages.