Friday, September 21, 2012


 Have you heard about it?  It's all over the news.  It's a disaster waiting to happen and storm flags have been raised.  Its warnings are getting more and more intense and the language is virtually biblical.  It could be the end of the world if some are to be believed.  It has produced a bumper crop of Chicken Little's convinced the sky is falling.  What is this cataclysm which we must avoid at all costs?  What is this threat to all we hold dear in this nation?

     If nothing is done to stop it, a fiscal "Armageddon" will befall this country on Dec. 31, 2012.  On that date, the massive tax cuts passed by George Bush, cuts which dropped rates to levels not seen since the 50's, will end and rates will rise back to the levels they were when Bill Clinton was president.  The payroll tax cut will also end and across the board cuts will occur throughout the federal budget including the War Department.  This "sequestration" of funds was part of the bi-partisan deal to raise the debt ceiling.  (Vice Presidential candidate Paul Ryan supported and voted for the deal.)

     Moody's Investment Services says it could downgrade the nation's credit rating if this comes to pass.  (This is a strange turn of events because Moody's last downgrade was because the U.S. wasn't cutting spending and dealing with an out of control fiscal emergency.  Now they are going to cut it because the U.S. is cutting too much?)  Economists tell us if this plan is allowed to go into effect, economic growth will suffer.  As much as 1% of GDP (Gross Domestic Product) could be lost if the tax cuts and sequestration are allowed to occur.  We are told this is a cliff which we must avoid at all costs.  It's the Y2K fear all over again, but worse.  We must do everything we can to avoid this economic black hole.  Are you scared yet?

     Would it be heresy to suggest we do nothing and let all of this come to pass?  Would it be sheer lunacy to propose this could be a good thing in disguise...that the results could be the best thing to happen to Washington and Congress, the White House and us?  If the Bush tax cuts are allowed to expire, billions of dollars in revenue will flow into the treasury.  Tax rates under Bill Clinton were so odious and oppressive over 20 million jobs were created, we had 8 years of prosperity and a budget surplus when he left office.  Sounds horrible to me.  The cut in the payroll tax was a stimulant for the economy, but it threatens the fiscal health of Social Security and it too needs to be restored.  Sequestration would result in across-the-board cuts in discretionary spending including the budget for the War Department.  This is a budget which has seen massive increases over the last 10-15 years and the cuts proposed wouldn't even bring the department's budget back to Clinton era levels.  We spend more on the military than all other nations on earth combined.

     What would January 1, 2013 look like if we dove off this cliff headfirst?  First, it wouldn't matter if Congress stays deadlocked for four years after this date.  It wouldn't matter if Democrats and Republicans couldn't agree on a thing.  The obstructionist tactics of Boehner, Cantor and McConnell would be rendered impotent because massive deficit reforms would be in place.  Government would be automatically smaller.  Revenue into the treasury would explode.  The deficit, which everyone agrees must be addressed, would be reduced and the trend lines would continue a downward curve.  Republican arguments about gutting Medicare and Medicaid would evaporate, as deficit projections would decline.  Congress could fail to pass any appropriation bills, and the nation's fiscal health would still improve.

     Yes, economic growth might slow, but it would still grow and the major obstacle to future growth, the deficit and debt, would have been addressed in a serious manner.  In fact, if Congress could not agree on anything, the benefits of the tax increases and spending cuts would grow faster and faster as economic growth picks up.

     The reality is Congress would start to debate ways to cut some taxes and hold hearings on how to spend the increased sums flowing into government coffers.  There would be no motivation to obstruct.  Just the opposite would happen.  The motivation now would be to cooperate.  Refusing to work with President Obama would not do Republicans any good.  Democrats would not have any reason to find bi-partisan solutions to economic problems.  Republicans would be looking for ways to cut taxes while Democrats would be proposing spending projects for infrastructure and education and the two would meet in the middle.

     Letting fiscal "Armageddon" happen...jumping off that cliff would make it easier to find more deficit reductions.  The curve wouldn't have to be so steep; the cuts wouldn't have to be so radical and deep.

     I am here to tell you this is a win/win proposition.  It scares the hell out of politicians because it doesn't require them to "do" anything, which they are very good at, and yet the nation benefits.  A war machine which has been on meth for far too many years will have to realistically prioritize and won't be able to demand such a large piece of the fiscal pie.  It's so beautiful.  The military budget is cut and Congress doesn't have to "do" a thing but watch.  The more you look at this, the less crazy it gets and that's the reason Washington can't let it happen.

     We need to call, write, text or email members of Congress and just use one word...JUMP.  We need to let the laws of unintended consequences take over.  This "situation" was never supposed to really happen.  Yet, if it does, this nation's fiscal foundations will be in better shape...the political language of obstructionism will be eliminated...Congress will have no excuse or motivation anymore to avoid working and become part of the solution instead of the problem.  (This year Congress did not pass even one of the 13 appropriation bills necessary to run the country.)

     It is counterintuitive to go and run and jump off a cliff with the belief it will benefit you.  In this case we need to "jump" and radically change how Washington does business.  I love it.


  1. Bernie,
    Thanks for explaining what the fiscal cliff is. From what I've heard from the media it sounded like the end of the world. If it is simply what you say (which I'm sure is true), it sounds like the best news in a long time. A real tax strategy (progrssive tax rates that go into the millions, a "robin hood" tax on stocks, an effective estate tax strategy, etc.) that could net hundreds of billions and real stimulative spending would be much better, but this fiscal cliff will have to do.

  2. yes thank you bernie very much. still miss you out here in the south bay Gilroy area.
    peace nd stay safe in there.
    Mike Ramirez Gilroy Ca.