The Fiscal Cliff

A forum on America’s impending budgetary doom and what to do about it

(Page 6 of 6)

Going off the "fiscal cliff" at the end of the year by allowing the income tax rate cuts first passed under President Bush to expire and allowing the so-called sequester to reduce spending across-the-board would reduce the deficit. But it would also throw the economy into a double-dip recession. According to the Congressional Budget Office, in fact, going off the fiscal cliff would shrink the economy by almost 4 percent in the first quarter of 2013 and drive the unemployment rate up to 9.1 percent in the next year.

These abrupt and reckless policies would severely dampen any hope for short-term economic growth that we need to strengthen the economy and put people back to work. An intelligent plan would do more to protect short-term growth by phasing in fiscal restraint gradually to give markets, businesses, and households confidence that we will pay down our debt and certainty over how it will be done.

In the long run, doing nothing to avoid the fiscal cliff would reduce federal debt. But it would also to provide a policy mix favorable to smart economic growth. Going over the cliff would raise marginal tax rates and cut investments thereby stifling long-term growth, and it would do so without addressing the real drivers of our debt. To be sure, continuing to let the debt rise uncontrollably would be the worst long-term outcome; but going over the cliff is certainly not the right way to promote long-term growth.

A deal to replace the cliff should not only protect the fragile recovery in the short-term, but prioritize growth in the long-term. It should cut spending which inhibits or does little to help growth while protecting important investments that are critical to long-term growth. It should reform the tax code to lower corporate and individual rates, but still raise more revenue through broadening the base. Finally, it should encourage a stronger, larger workforce through gradual increases in the retirement age.

Short and long-term growth policies do not have to be at odds with short and long-term deficit and debt reduction. Both can and should be included as the basis for a bipartisan solution to prevent the fiscal cliff and fix the debt. 

Marc Goldwein is the senior policy director of the Committee for a Responsible Federal Budget.

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  • sarcasmic||

    I predict that they will sail over the cliff, and many federal workers will go on an unpaid vacation.

    After much wringing of hands and rending of clothing, a compromise will be reached that cuts nothing and includes back pay for vacationing federal workers.

    It will be Bush's fault.

  • John||

    The cliff doesn't shut the government down. So no paid vacations.

  • Ken Shultz||

    I predict they come to a deal before the cliff.

    Unfortunately.

    I wish they'd go over the cliff and then reinstate the tax cuts after the spending is slashed by the cliff, but they won't.

  • Restoras||

    That word, slashed. It does not mean what you think it means inside teh beltway.

  • Calidissident||

    I don't understand why Republicans don't just pass tax cuts for everyone in the House, and then force the Democrats to "hold the middle class hostage" just to spite the rich

  • Stormy Dragon||

    Because the senate just ammends it to not include the top 2%, leaving the GOP to either filibuster the bill in the senate or vote against it when it comes back to the house.

  • R C Dean||

    Let's see, its a revenue bill, so I think the Senate can do amend it under reconciliation without clearing a filibuster.

    I still think it puts the GOP in a better position, negotiating-wise and PR-wise. They passed a clean bill, the Senate junked it up with this pointless and vindictive tax increase rather than fix the problem.

    If the House waits until the last minute, passes the bill and adjourns sine die, that's pretty much a take-it-or-leave-it for the Senate. Leaves the Prez and Reid holding the bag: either throw a huge temper tantrum and try to recall the House for the sole purpose of the tax increase, or suck it up and pass the House bill.

  • Stormy Dragon||

    Let's see, its a revenue bill, so I think the Senate can do amend it under reconciliation without clearing a filibuster.

    The senate can, but don't forget the Dems control the senate. Why would they want to use reconciliation to break the filibuster rather than just letting it continue and then blaming the fillibuster when the taxes go up?

  • Anonymous Coward||

    Because the God-Emperor Barack has deemed that lower tax rates for all is not "balanced" and he will not support any plan that is not balanced.

    Of course, "balance" means Barry gets what he wants and everyone else can suck it.

  • AlmightyJB||

    OT: Looks like Ohio's new casinos are wasting no time getting the competition shut down.

    Ohio Senate to shut down internet cafes

  • Citizen Nothing||

    The senate failed to act, so the bill can't come back until the next session. Chalk one up for the good guys.

  • nicole||

    OT: My comment disappeared from another thread but we are getting carry laws in IL. Finally. Last state without any carry provisions falls! And thank you Judge Posner!

  • ant1sthenes||

    Apparently someone figured out what "bear" meant to people living a hundred years ago.

  • Caleb Turberville||

    Oh, for the love of...

    I was just reading an article (by a liberal, fwiw) that gave a pretty good case for cutting the defense budget. It was awesome, except for the comments, which argued that the cuts would hurt because of the newly unemployed personnel it would cause.

  • ||

    This is one of the reasons we will ultimately never see anything cut.

    I don't remember the exact details but I recall that Welfare Reform ended not going as far as originally planed because of a handful of Republicans who were afraid that the cuts might lead to women having more abortions if there wasn't some kind of support. Clinton had indicated he was willing to sign the bill before that amendment so it didn't change any veto prospects.

  • Restoras||

    No alt+text? Really? I am disappoint.

    "This is ______!!!"

  • sarcasmic||

    Q: What did Geronimo say when he jumped off a cliff?

    A: Meeeeeeeeeeeeeeeeeeeeeee!

  • kinnath||

    There are some "fiscal cliff calculators" out there that show what happens if all the tax rates revert to pre-bush levels, if the democratic plan passes, and if the republican plan passes. The only reall difference is that the democratic and republican plans provide a small amount of lubricant before the ass fucking begins.

  • R C Dean||

    So what should Congress do about the fiscal cliff?

    "Jump, you fuckers!"

  • Ronulanus||

    *heavy sigh*

    If only there were more Rand Paul-like politicians in Washington, we wouldn't have to see and hear about this insipid "fiscal cliff" every single day. Slash defense spending, slash entitlements, and end the War on Drugs. All taxes can then be extended without the "fear" of the debt going up (which is actually a myth, since cutting taxes doesn't cost a single dime of taxpayer money).

    It's a simple solution where EVERYONE would have to give up their preferred sacred cow, but alas, it wouldn't really be Washington if that was the case, would it?

  • ||

    According to the Congressional Budget Office, in fact, going off the fiscal cliff would shrink the economy by almost 4 percent in the first quarter of 2013 and drive the unemployment rate up to 9.1 percent in the next year.

    Can't wait for Shrike to tell us again about how great the recovery is.

    Of course if the recovery was so great then how come a slight slowing of the growth of military spending and returning to the tax rates of Clinton will utterly obliterate our economy?

  • 16th amendment||

    If we don't deal with the double dip recession now we will have to deal with a depression later.

  • MacKlingon||

    They will continue kicking the can down the road, both sides will claim partial victory and blame the other side for the problems. Money printing/quantitative easing will continue. The dollar will continue to lose value at an increasing rate. Team red will continue to claim that 2+2=7, team blue will continue to claim 2+2=something in the double digits.
    The Pols and there friends get a lot richer and more powerfull, we get screwed.

  • uythsb||

    Merry Christmas

  • Tablet pc||

    This is so cruel

  • JayDick||

    At this point, the whole thing is political. The Dems will not accept anything that will actually help the economy. They are looking for a big political victory that will prevent Republican success in 2014 and maybe 2016 as well. The best the Republicans can hope for is to make sure Dems get blamed for the weak economy that will last for the foreseeable future.

    The best long-term strategy may be to give the Dems much of what they campaigned on; no more than necessary, but enough of what they want to hang the economy around their necks. That will put the Republicans in a strong position in 2014 and 2016. Only then is there any hope of getting things done that will help the economy.

    The only other alternative is an all-out war with the Dems, similar to a Presidential campaign. What are the chances the Republicans could win such a war? I'd say 50-50 at best.

  • chenyan||

    Christian Louboutin high heels http://chenyanyanyanyan.blogspot.com

  • Tablet pc||

    Fiscal is the life to a country

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