November 20, 2012

Horse 1403 - The Fiscal Cliff, Come On Over


Forgive me if I don't understand the fatalistic gibberish nonsense spewing forth from the vomitoria which make up both the American media and political dialogue of late. The "message" which they're so desperately trying to stay on is a so called "fiscal cliff", which sounds as idiotic to me as Kambrook's "electric water unraveller" which also does not exist.

The basic problem is that the United States has a massive debt problem caused by not less 180 years of continuous borrowing to pay for the costs of government. Indeed the country itself was started over a taxation dispute and the underlying issue is that people and companies simply do not want to pay tax. The states initially signed over $75 million which was incurred during the War of Independence and the US Government did achieve a net zero debt in the 1830s but the Civil War of the 1860s, two World Wars and lots of other wars have ensured that it has never been paid off since.
Compound this with a Social Security program which will start to become very expensive as the post war Baby Boomers start to draw on government pensions, which nowhere near enough money was set aside for; rather like General Motors which nearly went to the wall because of that very problem.

Given the massive debt, you'd think that the solution would be to raise taxation and reduce spending to at very least begin to make a dent in the debt. The problem here is the Taxpayer Protection Pledge which sort of prevents vast numbers of members of the Congress from ever voting for such things.
Instead the "fiscal cliff' are a range of Bush-era tax cuts which are due to expire and automatic spending cuts. These two things are precisely what should be done to reduce the debt in the first place but wouldn't have been done and will continue not to be done if people get their way.
This whole fiscal cliff problem is like finding the biggest and drunkest man at the bar, filling him full of very cheap whiskey, giving him a range of guns, telling him that people are out to get him and then filling him with more cheap whiskey and caffeine so that he's paranoid and starts smashing people who look different but not letting him sober up to realise that his wallet went missing some time ago and the bar has been keeping a slate. Eventually he's going to sober up, be forced to pay up, end up with a massive hangover and find that the people he's smashed are angry and still want to pick a fight with him.

I rather think that it is a very good thing that America goes over the fiscal cliff. For a start, I don't believe that it is a cliff but that it's more like a small dip in a river that a canoe gets snagged on.
The Democrats can claim that because the Republicans won't negotiate on taxation cuts, that the cliff is a necessary check on the prudency of political process. They'd lose some things that they'd fought for such as the bottom 10% tax bracket and changes to childcare transfers but they'd still be getting tax increases at the top which the Republicans wouldn't have agreed to otherwise.
The Republicans can claim that they didn't break their pledges not to raise taxation because an automatic expiration is a different thing to actively voting for increases. They can appease the Republican Right which includes the Tea Party (which given the incredible right shiftedness of American politics anyway, means that they're extremely massively fiscally to the right) and thus keep their "brand" intact.
In the light of partisan politics and a refusal by both sides to negotiate anything sensibly, the fiscal cliff seems to be about the best result which can be hoped for.
The 113rd Congress is not markedly different to the 112th in makeup. At least from a legislative perspective, it means that the people have decided by default for a continuance in the amount of gridlock. The fact that Obama has been returned as President says that they want the executive of the nation to continue what it's doing.
I don't know what sort of seismic shift in politics it would take to move either party but I don't think that we're going to end up with a spirit of compromise.

Obama looks unflappable on the issue. Either this indicates that he's adopted a wait and see approach, or perhaps more obviously he simply can't devote the energy to the issue at the moment, what with rocket fire being exchanged between Hamas and Israel. Maybe it could mean that he also thinks that doing nothing and going over the fiscal cliff is the best possible outcome as well.

I do know that December 21 is the key date here because Congress shuts down for the Christmas break and by the time it reconvenes on January 7, the canoe will already have gone over the cliff.
Personally I don't think that there's anything bad on the other side except for the usual jungle which contains the normal bears and bulls on Wall St, and the elephants and donkeys in Washington; no-one wants to listen to the wise old owls any more... so over the cliff we go.

1 comment:

Anthony said...

I'm sure both sides will work something out before the deadline.