Normative Narratives

Economic Outlook: “Teetering on the Edge” of the Fiscal Cliff

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President Obama cut his holiday vacation in Hawaii short to resume talks in hopes of averting the fiscal cliff. Members of Congress will also be called back. What could possibly make two sides that cannot seem to agree on anything more cooperative then pulling them away from their families during the holidays? You will have to excuse me for not shedding a tear for these poor politicians, they’ve had months to deal with this issue—the ineptitude of our political system over the last few months (years?) is mind boggling.

The “Fiscal Cliff” is not is really a cliff, it is more of a hill which eventually leads to a river of molten magma. Spending cuts will take time to be enacted, and tax increases won’t hit immediately either. The January 1st deadline will not lead to The Great Depression, but confidence (consumers, producers, and financial markets as well) will be shaken. Also, the clock will start ticking on real human suffering at the hands of elected officials, which is unacceptable.

The fiscal cliff talks remind me of a Simpsons episode (as most things in life do). In “Much Apu  About Nothing”, the citizens of Springfield face the catch 22 of government services (they must be paid for).

“Quimby: Are those morons getting dumber or just louder?

Assistant: [Takes a moment to check his clipboard] Dumber, sir.

Quimby: They want the bear patrol but they won’t pay taxes for it. This is a situation that calls for real leadership. [Opens the door to his office to confront the angry mob.]

People, your taxes are high because of illegal immigrants! “

It has already been highlighted that many conservative small government states are also the states which receive the most federal aid. People want the services the government provides, they simply do not want to pay for them (understandable, but not rational).

This has led the G.O.P. from being conservative on budget deficits to a “starve the beast” approach to governance. The party believes that large surpluses are bad for the economy, as they will lead to expansion of government services (which they believe will lead to inefficiencies in both the public and private sector). By cutting taxes, and bringing in less government  revenue, programs will have to be cut. This was the thinking behind the Bush-era tax cuts.

This is not how governance has worked in practice however. Social programs are very popular, and some are necessary for security, and economic growth and stability. Instead of cutting programs en lieu of lower taxes, these programs were financed by deficit spending. Add a few expensive wars and a bursting housing bubble and you get the “Great Recession” of 2007-2009.

The G.O.P., through bad policy and bad philosophy has gotten us into this mess. Now, they hope to extend the mess by continuing with their tried and failed rhetoric. It is time to wake up and smell the bullshit people. Even if you do not agree with gay marriage, gun control, or allowing illegal immigrants to stay in the country, you should believe in arithmetic and historical / empirical fact. The G.O.P. allowed itself to become controlled by a fringe group (which rhymes with the Pee Party), and continues to hold the U.S. economy hostage in order to protect the interests of a small group of wealthy supporters.

Do not be fooled by the scapegoats (“People, your taxes are high because of illegal immigrants!”), the problem and solution are both as clear as day.

It is amazing that the House of Representatives was able to maintain a G.O.P. majority after the ineptitude of the 2010-2012 congress. Perhaps we need to start teaching economics and political science to students at a younger age, because there is clearly a mismatch between how things work and how the majority of the country perceives how things work.

There is also the fact that the average American is much more willing to compromise than elected officials. Perhaps a national referendum (vote) should be allowed during times of political gridlock. Some countries allow a vote of confidence to dissolve an ineffective government and vote on a new one, maybe the U.S. congress needs a similar mechanism.

What do you guys think?

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