The Fiscal Curb

The inspiration for blog posts here usually come in the form of a concise idea. Sometimes that idea can be well expressed in only a few words. So, I today, I sit down to talk about my views on the so-named "fiscal cliff".

Yes, we've seen this drama before. The talk of big time financial doom and gloom.  Debt ceiling approacheth. Blasted Republicans, Darn Democrats. Economic hardships all over the place. Woe is us. The government has to do something!

Stop right there.

The government has to do something? Let's examine how we got here. The government has to solve this artificial problem it created to avoid the other artificial problem it also created (i.e., the debt ceiling)? 99% of politicians are giving the rest of them a bad name, again.

We are subjected to this Kabuki Theater with every congress, and with every changeover of elected officials. The result is almost always the same. Crisis looming, elected officials arrive, hammer out what the press will call a compromise, and voila! Heroes are made.

The guy who has gone before the fiscal policy makers and asked for fiscal sanity, one Ben Bernanke, is credited with first using the term "fiscal cliff". He and the Federal Open Markets Committee have maxed out the printing presses. If that isn't doing enough damage, Bernanke also wants congress to back off the last existing attempt to stop the spending madness, lest we all step off the cliff.

It's not a cliff, I am here to say. I came up with the term  "fiscal curb" to describe what we face on January 1st. ...I thought that was clever until I saw that over 4000 other blogs, most of them liberal, were using the same term. Let's see if they agree with this:

What's really wrong with the fiscal cliff.

1. It's not the tax increases. We all know that the national debt is a severe drain on future resources, and anything that begins to slow the increasing debt is fundamentally good. To have it fall on the shoulders of the 1% is clearly unfair, but fairness isn't really in the political playbook this season. The economy will sort itself out, as it does best when the rules are stable.
2. It's not the return of the payroll tax back to 6.2%, or as otherwise known: "full" funding of the social security system. It is the only fair tax we have. It is straight off the top with no deductions. I would prefer it to be a sequestered fund, but that's a topic for another day.
3. It's not the affordable care taxes. We saw these coming two years ago, and we should not take steps to hide their impact. Laws have consequences. Let's show the average American what they voted to keep. They aren't going to like it, and the law will be changed, or collapse under its own weight. This would be a very good result.
4. It's not the spending cuts. $109 billion is peanuts. Chicken feed. It is 0.67% of the deficit. That won't cover the interest on the debt. Don't fear it. Don't fight it. Those who claim a reduction in GDP are really the same people wanting government spending to be a large part of GDP. The truth is that any money not spent by government, means money spent in productive enterprise. Less government spending is always good. If there is anything wrong with the spending cuts, it is that we should be looking at a minimum of 600 billion/year.
5. It's not the end of extended unemployment benefits, either. It's time for everyone to go back to work, and they know it, too.
6. And, It's not the ending of the medicare doc fix. If you are moving towards socialized medicine, there's nothing wrong with showing Americans what that looks like, with doctors leaving practice, and moving to Belize.

No, none of that is bad. So, what is wrong with the fiscal cliff? Only that the press has bought into the notion that it is a fiscal cliff, and eagerly await in the audience as the politicians warm up for another round of Kabuki.

If it is not averted, what it means for the economy is the average American will need to pony up another $300/ month to Uncle Sam. Chicken feed, especially when you compare it to the cost to the economy avoiding the curb entirely.