Tuesday, December 11, 2012


At the moment, I'm willing to speculate the powers-that-be in Washington will not come to an agreement in time to avoid a swan dive over the fiscal cliff.  Good!!  As I have written before, it would be to the long-term benefit of the nation if no deal is made and the unthinkable happens.  Top tax rates would go back to what they were under Bill Clinton.  (when 27 million jobs were created)  The payroll tax would rise.  (it's not good for Social Security to keep it at its present rate)  Military, and other government spending, would automatically be cut.  (the military can easily absorb these cuts.  They have seen their budgets grow for years to a point where we spend more on the military than all other nations on earth combined.  They have experienced deeper cuts in the past and handled them.  These cuts will barely slow growth.)  The end result would be significant progress in getting our fiscal house in order, reining in out-of-control military spending, increasing the progressivity of the tax code and leaving America in better condition than it is now.

     At the bottom of the fiscal cliff is supposed to be death and destruction.  Many Americans, and small businesses, will be hurt by the re-emergence of the Alternative Minimum Tax.  (This tax was intended for the 1%, but because of the craven cowards in Congress, it wasn't indexed for inflation so it engulfed larger and larger numbers of American taxpayers raising money for government without Congress having to do a thing)  This would force Congress to finally solve this problem and return the AMT to its original purpose.

     The military would no longer get a blank check.  We spend more money on the War Department and get less for it and threaten our fiscal health.  It is not sustainable.  Priorities have to be set.  What kind of wars do we predict in the future?  Where will they occur?  Do we expect traditional conflict or an increase in asymmetrical encounters?  As we shift our emphasis to the Pacific, what are the implications for our commitments to NATO etc.?  (Is Libya the new model where we insisted on other nations carrying a much larger load?)

     American families will see their taxes increase.  Going over the fiscal cliff changes the entire nature of the debate about taxes.  Now we will have the Republicans and Obama arguing over tax cuts not increases.  The increased revenue coming into the government coffers will mean the President can propose finally rebuilding the nation's infrastructure and electrical grid. (resulting in tens of thousands of jobs)  Grover Norquist would crawl back under the rock he emerged from and the "tax pledge" will be a thing of the past.  Republicans would be complicit in raising taxes eliminating one of their favorite attack lines against Democrats.  The entire tenor of the discussion in Washington would dramatically change if we go over the cliff.

     Going over the cliff would make it easier to address Medicare and how to return it to fiscal solvency.  Right now, the Republicans can hold Medicare hostage.  They can use it as a bargaining chip to force Obama to agree to deep cuts in the social safety net in return for their support of some kind of deal to avoid the cliff.  If we go over it, then their leverage is gone.  Repairing Medicare can be debated on the merits and the fixes can actually fix it.  (remember, the Republicans don't want to fix Medicare, they want to end it...privatize it...just like Social Security)

     The point to remember is this cliff is the product of an agreement between Republicans and Democrats.  Everyone signed off on this deal.  There is no one to blame if we go over because that's how this was designed by the two parties last year.  Going over the cliff will result in some fiscal discipline as well as force everyone to compromise.  It is exactly what the rating's agencies and European bankers say must happen.  It may be the only way this happens.  It may be the only way to get some control over military spending and open the door to real entitlement reform.

     If you feel so inclined, write to the President, or email, or tweet or just shout and tell him we are willing to lock arms and jump together.  We are all ready to change our names to Thelma and Louise.

1 comment:

  1. Everyone, please listen to this talk and others by Hans-Hermann Hoppe.
    Then comment here on the idea for an economic system entirely unlike what we now experience.