# What is so bad about the fiscal cliff? **URL:** \ **Category:** Great Debates\ **Created:** [November 27, 2012, 4:54pm UTC](https://boards.straightdope.com/t/what-is-so-bad-about-the-fiscal-cliff/642278 "2012-11-27T16:54:50Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![Robb](https://avatars.discourse-cdn.com/v4/letter/r/a183cd/32.png) [@Robb](https://boards.straightdope.com/u/Robb)\ **Post date:** [November 27, 2012, 11:02pm UTC](https://boards.straightdope.com/t/what-is-so-bad-about-the-fiscal-cliff/642278/21 "2012-11-27T23:02:39Z")
**XT** , I know that at least Paul Krugman asserts that decreasing public spending during a time when private spending is down harms an economy. The Eurozone countries that picked austerity decided to damage their economies. In return, it might now take them years or decades to recover. ---
**Author:** ![XT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/xt/32/456_2.png) [@XT](https://boards.straightdope.com/u/XT)\ **Post date:** [November 27, 2012, 11:28pm UTC](https://boards.straightdope.com/t/what-is-so-bad-about-the-fiscal-cliff/642278/22 "2012-11-27T23:28:57Z")
> [@Robb](#): > > **XT** , I know that at least Paul Krugman asserts that decreasing public spending during a time when private spending is down harms an economy. The Eurozone countries that picked austerity decided to damage their economies. In return, it might now take them years or decades to recover. And he might be right…or, might not. But there is no way to know yet, as in most cases we are talking about ‘austerity’ that actually equals ‘we ain’t got the money so we are forced to shut things down’ being in for months or maybe a year or two at most. Most of the countries so screwed up that they are resorting to this stuff took literally years to get to this point, so it’s ridiculous to ask how ANYTHING is working out for them yet. Which was my point. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [November 27, 2012, 11:40pm UTC](https://boards.straightdope.com/t/what-is-so-bad-about-the-fiscal-cliff/642278/23 "2012-11-27T23:40:57Z")
> [@XT](#): > > Do you have a cite for that? [This](http://www.tradingeconomics.com/spain/government-budget) seems to indicate that the budget deficit is dropping (from a high in 2010). Sure. How about [this one.](http://www.telegraph.co.uk/finance/financialcrisis/9423143/Debt-crisis-where-did-it-all-go-wrong-in-Spain.html). Search for Spain fiscal crisis budget surplus. 2010 is of course after the crash. My original cite noted that the predictions are for the deficit to decrease slightly - but is that really a good return for 25% unemployment and the exodus of the cream of the Spanish crop to Germany? > [@](#): > > What, they started ‘austerity’ a year or so ago and that’s supposed to automatically let the good times roll back already?? The countries who have been forced to do this stuff were in deep shit, and it’s going to take years, maybe decades to dig their way out. Hell, it took Germany (who ALSO did the whole ‘austerity’ thingy years ago, and who now has a pretty thriving economy) years before they got a return on investment. > > I’m not sure where you were going with this, but it’s one of the sillier arguments I’ve ever seen you make…and that’s unusual for you. ☹ In support of him, you’d think that these measures to heal the economy would be heading things in the right direction. Do you have a cite for anyone predicting that austerity would result in economic decline? (By a supporter of it, of course, Krugman predicted it correctly.) I believe austerity was supposed to increase business confidence and thus growth. Has it? ---
**Author:** ![Saint\_Cad](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/saint_cad/32/18907_2.png) [@Saint\_Cad](https://boards.straightdope.com/u/Saint_Cad)\ **Post date:** [November 27, 2012, 11:46pm UTC](https://boards.straightdope.com/t/what-is-so-bad-about-the-fiscal-cliff/642278/24 "2012-11-27T23:46:12Z")
> [@The\_Hamster\_King](#): > > The fiscal cliff is bad because it reduces the deficit and the government should run a deficit during an economic recovery to stimulate the economy. > > Of course, everyone has also decided that cutting the deficit right now is really, really important. So any deal to avoid the fiscal cliff must involve major steps to cut the deficit. > > So, essentially, Congress needs to quickly come up with a deal to cut the deficit so we can avoid being forced to cut the deficit … . So explain the rationale for deficit spending during times of prosperity. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [November 27, 2012, 11:49pm UTC](https://boards.straightdope.com/t/what-is-so-bad-about-the-fiscal-cliff/642278/25 "2012-11-27T23:49:08Z")
> [@XT](#): > > And he might be right…or, might not. But there is no way to know yet, as in most cases we are talking about ‘austerity’ that actually equals ‘we ain’t got the money so we are forced to shut things down’ being in for months or maybe a year or two at most. Most of the countries so screwed up that they are resorting to this stuff took literally years to get to this point, so it’s ridiculous to ask how ANYTHING is working out for them yet. > > Which was my point. Given that we are seeing economies shrinking after austerity measures are put in, can you give a plausible path from them to economic growth? Remember that these are Eurozone countries, and so won’t get the benefit of weakening currency. Sure in time things will get better, but in time it rains whether or not the rainmaker has done his dance. Remember. without bailouts the market was bidding up interest rates for their debt, while for the US despite our profligate ways the market was bidding down our interest rates. ---
**Author:** ![Really\_Not\_All\_That\_Bright](https://avatars.discourse-cdn.com/v4/letter/r/e8c25b/32.png) [@Really\_Not\_All\_That\_Bright](https://boards.straightdope.com/u/Really_Not_All_That_Bright)\ **Post date:** [November 28, 2012, 12:01am UTC](https://boards.straightdope.com/t/what-is-so-bad-about-the-fiscal-cliff/642278/26 "2012-11-28T00:01:46Z")
> [@Saint\_Cad](#): > > So explain the rationale for deficit spending during times of prosperity. There isn’t one, but when we prosper we tend to find wars and other things to do with our excess productive capacity. ---
**Author:** ![gatorslap](https://avatars.discourse-cdn.com/v4/letter/g/bb73d2/32.png) [@gatorslap](https://boards.straightdope.com/u/gatorslap)\ **Post date:** [November 28, 2012, 12:20am UTC](https://boards.straightdope.com/t/what-is-so-bad-about-the-fiscal-cliff/642278/27 "2012-11-28T00:20:53Z")
> [@Saint\_Cad](#): > > So explain the rationale for deficit spending during times of prosperity. Is this a time of prosperity? ---
**Author:** ![Saint\_Cad](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/saint_cad/32/18907_2.png) [@Saint\_Cad](https://boards.straightdope.com/u/Saint_Cad)\ **Post date:** [November 28, 2012, 12:37am UTC](https://boards.straightdope.com/t/what-is-so-bad-about-the-fiscal-cliff/642278/28 "2012-11-28T00:37:37Z")
> [@gatorslap](#): > > Is this a time of prosperity? Seriously? Do I need to hunt up all of the years we’ve had deficit spending? [OK.](http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/hist01z1.xls) So convince me that none of these years since 1950 were years of prosperity since the government ran a deficit in: 1950, 1952, 1953, 1954, 1955, 1956, 1957, 1958, 1959, 1961, 1962, 1963, 1964, 1965, 1966, 1967, 1968, 1970, 1971, 1972, 1973, 1974, 1975, 1976, 1977, 1978, 1979, 1980, 1981, 1982, 1983, 1984, 1985, 1986, 1987, 1988, 1989, 1990, 1991, 1992, 1993, 1994, 1995, 1996, 1997, 2002, 2003, 2004, 2005, 2006, 2007, 2008, 2009, 2010, 2011, 2012. Are you claiming that all of those years we needed government economic stimulus because that is Hamster King’s argument. ---
**Author:** ![Really\_Not\_All\_That\_Bright](https://avatars.discourse-cdn.com/v4/letter/r/e8c25b/32.png) [@Really\_Not\_All\_That\_Bright](https://boards.straightdope.com/u/Really_Not_All_That_Bright)\ **Post date:** [November 28, 2012, 12:38am UTC](https://boards.straightdope.com/t/what-is-so-bad-about-the-fiscal-cliff/642278/29 "2012-11-28T00:38:41Z")
I’m not sure exactly what **Hamster King** was trying to say, but I’m pretty sure that wasn’t it. ---
**Author:** ![XT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/xt/32/456_2.png) [@XT](https://boards.straightdope.com/u/XT)\ **Post date:** [November 28, 2012, 12:41am UTC](https://boards.straightdope.com/t/what-is-so-bad-about-the-fiscal-cliff/642278/30 "2012-11-28T00:41:42Z")
> [@Voyager](#): > > Given that we are seeing economies shrinking after austerity measures are put in, can you give a plausible path from them to economic growth? Remember that these are Eurozone countries, and so won’t get the benefit of weakening currency. Sure in time things will get better, but in time it rains whether or not the rainmaker has done his dance. > > Remember. without bailouts the market was bidding up interest rates for their debt, while for the US despite our profligate ways the market was bidding down our interest rates. Well, I don’t honestly see ANY path that plausibly leads to growth for many of the countries in the worst straights, to be honest. Certainly there is no magical solution that would have most of them out of the woods this soon, regardless of what which side of this debate you are on. Again, that was my point. I don’t frankly know enough about economics to know whether ‘austerity’ would work in many or even any of the worst cases over in Europe. I know that it worked for Germany years ago, and they are one of the strongest economies in Europe today, but I have no idea if that means it would work for these others, or even if it was austerity (non-forced by circumstance as it is in many of these cases today) or just that the Germans have a strong economic system with a good mix of policies and products, coupled with the fact that they are dominant in the EZ and one of the major players in setting policy…always an advantage in gaining a strong economy. I do suspect that countries like Greece can’t simply borrow their way out of their troubles, and that they have such systemic faults that some measure of ‘austerity’ is going to happen regardless…unless they can find someone to bankroll them to keep the party going for another couple of years. As to the fiscal cliff in the US, my own thoughts are closer to the posters above that say that we need to cut spending AND increase taxes, but that this forced and ad-hoc approach is going to be particularly painful and probably going to spin the economy down even further than it already is. That said, I don’t see a lot of spirit of compromise on either side in making tough choices, so perhaps this is the best of the bad choices. It’s definitely going to hurt, but what’s the alternative at this point? WE could borrow our way out for a while, but when do we pay that down? If we add a bunch of new entitlements, what gets cut when the good times come back…and who is going to be willing to make those cuts when/if those theoretical good economic times come back sometime down the road, even granting that the Keynesian’s are correct? ---
**Author:** ![Saint\_Cad](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/saint_cad/32/18907_2.png) [@Saint\_Cad](https://boards.straightdope.com/u/Saint_Cad)\ **Post date:** [November 28, 2012, 12:53am UTC](https://boards.straightdope.com/t/what-is-so-bad-about-the-fiscal-cliff/642278/31 "2012-11-28T00:53:37Z")
> [@Really\_Not\_All\_That\_Bright](#): > > I’m not sure exactly what **Hamster King** was trying to say, but I’m pretty sure that wasn’t it. > [@The\_Hamster\_King](#): > > The fiscal cliff is bad because it reduces the deficit and the government should run a deficit during an economic recovery to stimulate the economy. So if the government should run a deficit during bad times then what about times we ran a deficit during good times? Hence the reply to gatorslap that while the last 4-5 years we may have needed deficit spending, the argument that we also have deficit spending during good times and in doing so completely undermines true Keynesian economics that advocates saving when you can. In other words, the argument is fails that we need to have deficit spending now for reason X when your belief is that we should ALWAYS have deficit spending. ---
**Author:** ![The\_Hamster\_King](https://avatars.discourse-cdn.com/v4/letter/t/8edcca/32.png) [@The\_Hamster\_King](https://boards.straightdope.com/u/The_Hamster_King)\ **Post date:** [November 28, 2012, 12:58am UTC](https://boards.straightdope.com/t/what-is-so-bad-about-the-fiscal-cliff/642278/32 "2012-11-28T00:58:42Z")
> [@Saint\_Cad](#): > > So explain the rationale for deficit spending during times of prosperity. There isn’t one. That’s when the government should run surpluses. ---
**Author:** ![Ravenman](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ravenman/32/2929_2.png) [@Ravenman](https://boards.straightdope.com/u/Ravenman)\ **Post date:** [November 28, 2012, 1:00am UTC](https://boards.straightdope.com/t/what-is-so-bad-about-the-fiscal-cliff/642278/33 "2012-11-28T01:00:33Z")
> [@Saint\_Cad](#): > > So convince me that none of these years since 1950 were years of prosperity since the government ran a deficit in: 1950, 1952, 1953, 1954, 1955, 1956, 1957, 1958, 1959, 1961, 1962, 1963, 1964, 1965, 1966, 1967, 1968, 1970, 1971, 1972, 1973, 1974, 1975, 1976, 1977, 1978, 1979, 1980, 1981, 1982, 1983, 1984, 1985, 1986, 1987, 1988, 1989, 1990, 1991, 1992, 1993, 1994, 1995, 1996, 1997, 2002, 2003, 2004, 2005, 2006, 2007, 2008, 2009, 2010, 2011, 2012. There is no point of trying to convince you that 2008 and 2009 were not years of prosperity if that fact is not immediately obvious to you. And why should anyone even mention the recessions in the late '70s, early '80s, and early '90s? You seriously need to be convinced that there were recent recessions in the United States? ---
**Author:** ![The\_Hamster\_King](https://avatars.discourse-cdn.com/v4/letter/t/8edcca/32.png) [@The\_Hamster\_King](https://boards.straightdope.com/u/The_Hamster_King)\ **Post date:** [November 28, 2012, 1:04am UTC](https://boards.straightdope.com/t/what-is-so-bad-about-the-fiscal-cliff/642278/34 "2012-11-28T01:04:47Z")
> [@Saint\_Cad](#): > > In other words, the argument is fails that we need to have deficit spending now for reason X when your belief is that we should ALWAYS have deficit spending. That’s not my belief. ---
**Author:** ![DSYoungEsq](https://avatars.discourse-cdn.com/v4/letter/d/c6cbf5/32.png) [@DSYoungEsq](https://boards.straightdope.com/u/DSYoungEsq)\ **Post date:** [November 28, 2012, 1:17am UTC](https://boards.straightdope.com/t/what-is-so-bad-about-the-fiscal-cliff/642278/35 "2012-11-28T01:17:08Z")
The “fiscal cliff” is a stupid thing to foist upon us. The ultimate goal of reducing spending and increasing income is, of course, desirable, but simply cutting budgets across the board a specific percentage without regard to usefulness of the program is unmitigated stupidity. Which was the point: put something in place that only idiots would allow to happen, and the non-idiots in Congress would find an alternative. The trouble with this assumption is that Congress, while not filled with idiots, is filled with people who have no desire or willingness to compromise on the things that can be used to avoid the “fiscal cliff”. They are as staunchly against them in some ways as the members of Congress that were in place before the Civil War were against the potentials for compromise on the issues of that day. When someone like Grover Norquist continues to threaten the functional equivalent of a political holy war against any Republican who agrees to increase government income to solve the problem, and that is more than a hollow threat, it’s hard to see how Congress can manage to overcome the divide. Given that that was the case, the “fiscal cliff” was a near certainty in terms of being a suicide drive. I believe a better option is a phased out reduction of the “Bush-era tax cuts”. Instead of inflicting the return to the old rates and lack of deductions/payments in one fell swoop, phase them in over three to four years. In the meantime, make it clear to federal departments that, starting next year, they will have to have to either restrict year-over-year spending to present levels, or reduce by targeted amounts, depending upon the level of importance of the department to the needs of the nation. I don’t think we are really at the point where a bitter pill is needed. But we DO have to come to grips with the fact that the wars in the Middle East came with a cost, and that bill has got to start being paid. ---
**Author:** ![Saint\_Cad](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/saint_cad/32/18907_2.png) [@Saint\_Cad](https://boards.straightdope.com/u/Saint_Cad)\ **Post date:** [November 28, 2012, 1:41am UTC](https://boards.straightdope.com/t/what-is-so-bad-about-the-fiscal-cliff/642278/36 "2012-11-28T01:41:47Z")
> [@Ravenman](#): > > There is no point of trying to convince you that 2008 and 2009 were not years of prosperity if that fact is not immediately obvious to you. And why should anyone even mention the recessions in the late '70s, early '80s, and early '90s? > > You seriously need to be convinced that there were recent recessions in the United States? So is every year I listed a year of recession? If not, can you justify deficit spending in those yearsthere wasn’t a recession because according to my count, if recession=deficit spending then since 1950 we must have only had 6 years of prosperity. ---
**Author:** ![Willcross](https://avatars.discourse-cdn.com/v4/letter/w/b2d939/32.png) [@Willcross](https://boards.straightdope.com/u/Willcross)\ **Post date:** [November 28, 2012, 2:02am UTC](https://boards.straightdope.com/t/what-is-so-bad-about-the-fiscal-cliff/642278/37 "2012-11-28T02:02:11Z")
Well, since the fiscal cliff was just a tool to encourage congress to make a compromise, couldn’t congress just choose to not go through with it on Jan 2? It was imposed by themselves. Isn’t the most likely result to be congress choosing to extend the cliff out another year or six months? ---
**Author:** ![jshore](https://avatars.discourse-cdn.com/v4/letter/j/b5e925/32.png) [@jshore](https://boards.straightdope.com/u/jshore)\ **Post date:** [November 28, 2012, 2:18am UTC](https://boards.straightdope.com/t/what-is-so-bad-about-the-fiscal-cliff/642278/38 "2012-11-28T02:18:40Z")
> [@Saint\_Cad](#): > > This is in GD because although there may be a factual answer, I suspect most replies will come from the Neo-Keynesians on the board with their typical line of “Holy shit!!! If we don’t keep shoveling currency in the furnace, this country will be back in the Stone Age by Thursday.” hence a GD From what I can see, the problem is not so with the “Neo-Keynesians” as it is with the “If-only-we-could-afford-to-be-Keynesians” like yourself who seem to believe that because Bush behaved badly, we can’t afford Keynesian economics now and have to have austerity, economics be damned. Also, I think it is probably too strong to say that we have to necessarily run surpluses in the good times. It may be good enough to run deficits that are small enough that, for example, the debt-to-GDP ratio decreases over time. I am not sure that is the exact best criterion, but the basic point is that it is too simplistic to think of the government budget like the family budget that has to average out balanced over time. ---
**Author:** ![Oedipus](https://avatars.discourse-cdn.com/v4/letter/o/8e7dd6/32.png) [@Oedipus](https://boards.straightdope.com/u/Oedipus)\ **Post date:** [November 28, 2012, 4:07am UTC](https://boards.straightdope.com/t/what-is-so-bad-about-the-fiscal-cliff/642278/39 "2012-11-28T04:07:30Z")
> [@Saint\_Cad](#): > > Seriously? Do I need to hunt up all of the years we’ve had deficit spending? > [OK.](http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/hist01z1.xls) > So convince me that none of these years since 1950 were years of prosperity since the government ran a deficit in: _snip_ **1994, 1995, 1996, 1997, 2002, 2003, 2004,** Thanks a lot, 9/11. /joke ---
**Author:** ![gatorslap](https://avatars.discourse-cdn.com/v4/letter/g/bb73d2/32.png) [@gatorslap](https://boards.straightdope.com/u/gatorslap)\ **Post date:** [November 28, 2012, 5:21am UTC](https://boards.straightdope.com/t/what-is-so-bad-about-the-fiscal-cliff/642278/40 "2012-11-28T05:21:48Z")
> [@Saint\_Cad](#): > > So is every year I listed a year of recession? If not, can you justify deficit spending in those yearsthere wasn’t a recession because according to my count, if recession=deficit spending then since 1950 we must have only had 6 years of prosperity. Who here said that all of the deficit spending that has ever occurred was justified? [Previous page](https://boards.straightdope.com/t/what-is-so-bad-about-the-fiscal-cliff/642278.md?page=1) [Next page](https://boards.straightdope.com/t/what-is-so-bad-about-the-fiscal-cliff/642278.md?page=3)