Well, the political bodies that would allow us to go off the cliff and break the addiction cold turkey will be fearing for their jobs, fearing the reaction on the Right would make the Tea Party look like, well, a tea party of Nobel laureates, and on the Left would replace Occupy Wall Street with Burn Down Wall Street. This because economically you’d take a big hit with the consequent social distress and the different factions are expected to not say “we’re in this together” but “it’s THEIR fault for not backing off”.
The CBO also predicts unemployment would rise (in the short term) back up above 9%. What we get is reducing the deficit to less than 1% of GDP within just a few years, instead of a deficit of over 5% of GDP (but lower short-term unemployment) if we forget the whole thing (see slide 3 here).
Personally I lean toward going over the cliff and being ready to catch the people this pushes into an emergency. Everybody else has to paddle a little harder until we get the problem solved. But I am not terribly confident this idea is wise, I have to think about it some more.
Right, but if we do nothing we’ll probably end up in the same situation anyway in the long run, only without having tried to do anything to solve the problem in the meantime.
Wall Street is the author of all our problems. They spend all their time coming up with new ways of gambling, and new rationales why they should be allowed to gambel with our money. Burning down Wall Street is definitely overdue.
No; the point is that when inflation/interest rates/unemployment start to rise, these become short-term economic interests, and the Congress will decide policy at that time to deal with the near-term.
This idea plays into something else in this thread: The assumption that there is a fiscal “cliff” we are set to go over come January 1st if nothing is done about the sequester and the expiration of the Bush-era tax cuts. Personally I would characterise this as more of a fiscal “downslope”–the increased taxes would only be taken gradually during the year via withholdings (which could be changed before the end of 2013 and refunded in 2014 filings), while the spending cuts would phase in over a similar time (e.g. military cuts don’t apply to programs that have already been awarded).
Once again, the CBO prediction of a 1.5% drop in economic growth assumes Congress will do nothing during the year to change the rules of the game. Here again is an example of how a CBO score–meant to evaluate the potential impact of a budget item–is being misused by scare-mongers to gin up a mythical “cliff” that implies a disaster should we fail to act NOW NOW NOW. Personally I would like to avoid even a “fiscal downslope”, so I’m not at all convinced that the avoidance strategy should have deficit reduction as its central premise.
I’d also like to note that–for the record–the budget deficit for 2012 has now been reported at $1.089 trillion. That number is high, but (1) it is $200 billion less than what was projected by the CBO in last year’s forecast, and (2) it is nearly $300 billion smaller than when Obama took office–only Clinton reduced the deficit by this much in this short a period of time. For those who actually care about the deficit as a fiscal issue in the upcoming Grand Bargain discussions, I thought it would be worthwhile to point out these two facts.
From a conservative vantage point I would be wary of any Grand Bargain, because I think the tax increases will be a lot more permanent than any spending cuts.
I agree about CBO scoring being based on arbitrary rules, but that doesn’t change the overall picture, and I suspect the focus on CBO scoring is an attempt to obscure this.
[Also, it’s worth noting that the supposed “savings” in the ACA law were highly dependent on the CBO scoring, to which the law was carefully tailored, so those who dislike the CBO scoring should bear this in mind when trotting out the CBO numbers for ACA.]
This may be true but misleading. The numbers in the year Obama took office were themselves artificially high, and were thought to be a temporary reaction to an unusual crisis situation. The Obama deficits as a permanent level are thought to be unsustainable.