Please pardon the punny title but I don't think I had seen it used before and couldn't resist grabbing the low-hanging fruit. A commenter asked for my thoughts on the "fiscal cliff" situation. I'm happy to oblige, though as I noted this issue falls into the "extremely boring but pretty important" area, so I'll try to make it at least somewhat bearable.
First, I'm with others who don't really like the term "fiscal cliff" because it's a bit misleading. It sounds like if we go off the cliff we'll be heading into massive deficits and reckless spending, when actually the opposite is true. A little background: in the summer of 2011 Congressional Republicans manufactured a crisis by refusing to raise the debt ceiling - the total amount of money Congress can borrow to finance the government. (The apolitical credit rating agencies specifically blamed the Congress GOP when they lowered the US government's credit rating.) They raised a big fuss about the mounting debt, excessive spending, etc. - basically what the Tea Party has been complaining about since January 21, 2009.
A brief aside - this brings to light what I consider is perhaps the biggest hypocrisy in modern American politics: Republicans are only "fiscal conservatives" when they don't occupy the White House. Clinton left government with a budget surplus and on track to totally pay off the debt in 10 years. Now, that may not have happened no matter who won in 2000, but it's undeniable that Bush immediately decided to spend that surplus on massive tax cuts and foreign adventurism. It started us down the path where we currently find ourselves, and Obama's biggest contribution to the debt was the stimulus package that was required in 2009 to spur the economy after the economic crisis partially brought on by Bush administration policies. Now, at least, the deficit isn't getting hugely bigger every year. Instead of acknowledging these facts, Republicans cry about every cent the government now spends, and Chris Christie notes at the RNC that "it doesn't matter how we got here." Do I believe that spending could be curtailed in some areas and made more efficient in others? Absolutely. But this is ridiculous.
Anyway, back to the story. Rather than addressing the problem on a permanent basis, Congress did what it does best - kicked the can down the road. An agreement to raise the debt ceiling was reached, and "triggers" were put into place that would take effect on January 1, 2013 if a permanent debt solution wasn't reached by then. On the one side, the Bush tax cuts for everyone would expire. On the other side, massive cuts in defense spending and other areas would occur. The idea was that nobody likes these solutions so it would urge both sides to reach a compromise in time to avert these triggers. A pretty stupid game of political chicken. If these actions did happen, however, the effect on the budget deficit would be greatly positive - much more revenue from the tax increases and much less expenditures from the spending cuts. It should be the budget hawks' dream come true. And yet almost no one wants it to happen.
Why? No one on the Right wants to admit it, but as economist Paul Krugman pointed out, the looming, potential effects of going off the cliff (a possible 2nd recession) basically prove that Keynesian economics is correct. Just about the worst thing to do to a weak economy is to raise taxes on everyone and significantly reduce government spending. In the past few years such "austerity measures" (at least in terms of reductions) have been implemented in European countries with more center-right governments, to mostly disastrous results. People need to have increased buying power in a weak economy to drive demand, and this is especially true for the poor and middle class, which far outnumber the rich. And decades of fiscal policy have shown that carefully managed government investment in the economy can have positive effects. Conservatives certainly have no problems accepting this with regards to the defense industry; it is time they acknowledge it in other areas too.
So what to do? President Obama very clearly ran on a platform of eliminating the Bush tax cuts for those who earn above $250,000 and keeping them for everyone else. This is a sensible move that I think will be non-negotiable as even Republicans are coming to see its inevitability. Returning tax levels on the rich to 1990s levels won't destroy the economy (remember horrible the economy was then?), and they will still be much lower than they were during the postwar economic boom. Of course, this won't be enough by itself to solve the debt problem. Ideally, we would have large-scale tax reform combined with responsible spending cuts. I would argue that defense should be cut at least somewhat as we bring troops home from Afghanistan to focus on, in Obama's words, "nation-building at home," but that may be wishful thinking. What we will probably get is the tax increase on the rich matched with some token cuts (I highly doubt the Democrats would cave on cuts to entitlement programs) that will just necessitate revisiting the issue in a year or two. Not great, but better than nothing. The law of business cycles dictates that eventually the economy will fully turn around and we will reach a much more appropriate time to address the debt on a permanent basis. Hopefully Congressional leaders and whoever the President is then will learn from the mistakes of the past and work towards a real solution, rather than express rage at deficits that their own side very much played a part in creating.
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