What IS this thing, anyway? It sounds scary and sinister, like maybe you should kill yourself off it via spectacular leap. Sounds … suicidal, actually. Which may not be far from the mark.
To understand this creature, we must begin at the beginning. Remember last August when there was a HUGE kerfuffle about the debt ceiling? Which, if the (idiotic, looney tune) Congress refused to raise the it, would push the US into this thing called “sovereign default”. “Sovereign default” is kind of like you, credit card user, suddenly deciding, “Hey! I’m gonna quit paying my credit card bill!” which, as most people know, is a bunch of small piles of owed cash bundled into one big pile by, say, Bank of America, who then pins you with one big debt because you signed the contract with them – right on the dotted line. If the whole COUNTRY blew off its debt and plunged into sovereign default, the government could stop abiding by the contracts it made with creditor nations, and possibly juggle the currency to alter the interest rates so they could negotiate to pay off some debts with reduced numbers of dollars. Of course, that would really piss off the creditor nations, who then might feel like declaring war or something. At the very least, there would have to be a big negotiation so the creditor nations could get something back for their investment, like have all the forests in Oregon cut down to satisfy the debt to China with raw lumber for Chinese lakeside dachas.
The other name for “sovereign default” is “debt restructuring”, which is a term we all should’ve heard in regard to such successful, high-power nations as Zimbabwe and Myanmar. The World Bank and International Monetary Fund, who are big players in the debt-restructuring racket, are not super-popular with anyone except really rich international first-worlders. This is because the World Bank and IMF are actually corporate enforcers, except that instead of busting your kneecaps, they just manipulate money to screw people in less fortunate parts of the world, and even in Canada.
Okay, so in exchange for NOT going into sovereign default, Obama signed this thing called the Budget Control Act, back in 2011, when the Tea Party was farting its way across the national stage. At the signing, the President said “”Is this the deal I would have preferred? No. But this compromise does make a serious down payment on the deficit reduction we need, and gives each party a strong incentive to get a balanced plan done before the end of the year.”
So Obama figured that the tradeoff was worth it – the rest of the planet wasn’t going to bitch-slap us right out of town because we managed to avoid defaulting on them. And then, he also counted on the House of Representatives somehow miraculously becoming thinking human beings by now, instead of a bunch of raw-nerved, pouty, angry dogmatists (eight seats fewer than there were, yet still too many) but NOOOOOOO…… and presto! Here we are!
So, where’s “here”? The mighty Fiscal Cliff, that’s where!
The FC is a combination of expiring tax cuts and across-the-board government spending cuts scheduled to become effective Dec. 31, 2012.
The concept behind the FC was that if the federal government allowed these two things to happen, it might not be good. Predictions mention a detrimental effect on an already shaky economy, possibly sending us back into an official recession as it cuts household incomes, increased unemployment rates and undermined consumer and investor confidence.
But at the same time, there’s a supposed silver lining: going over the FC would significantly reduce the federal budget deficit, because that’s where all the money would go that was formerly your tax deductions for your mortgage, charitable giving, etc., not to mention Medicare, food stamps, public works like road repair, and other benefits you earned for being a productive citizen of the United States. Yes! It’s true! Your Congressional representatives have the authority to barter away what small, concrete advantages you receive by being a tax-paying American, in order to pay off the debt accumulated by those Congresspeople NOT doing the job they were paid handsomely to do – guide the frikkin’ nation in a prudent and responsible fashion! Great! Thanks for the nice bag of crap, you guys!
But back to business. The impact on the economy of going over the FC could be dramatic. The combo punch of higher taxes and spending cuts would reduce the deficit by an estimated $560 billion, but the CBO estimates that implementation of these policies would cut the GDP by four percentage points in 2013, likely sending the economy back into the recession we just crawled out of. It also predicts unemployment would rise by almost a full percentage point, with a loss of about two million jobs. One Wall St. Journal article from May 16, 2012 estimated the impact in dollar terms: “In all, $280 billion would be pulled out of the economy by the sunsetting of the Bush tax cuts; $125 million from the expiration of the Obama payroll-tax holiday; $40 million from the expiration of emergency unemployment benefits; and $98 billion from Budget Control Act spending cuts. In all, the tax increases and spending cuts make up about 3.5% of GDP, with the Bush tax cuts making up about half of that.”
So the Republicans, who are so ferocious about defending the Bush tax cuts for the super-wealthy, are willing to go ahead, pitch us off the so-called cliff, screw their really-rich base, AND their low-info working class Tea Party voters, just to score on Obama? Wow. That’s ballsy. Really, really shortsighted, but the brazen, stupid confidence of it is breathtaking.
Of course, the third thing that happens is the Republicans get to stage a huge, windy drama that, if the predictions of recession prove out, lets them give Obama a beating to settle his hash for kicking their asses in the election. Which they think will “look good” to voters, except that the voters already pointed out that this crap was not gonna fly anymore. The Republicans created this financial dog’s breakfast through George Bush’s wacky Republican policies, and further back, with Reagan’s supply side BS. EVERYBODY KNOWS THAT, even legal, voting immigrant folk who haven’t been here for more than a year! DUH!
So, when we go down this path, this bad road, it is ENTIRELY due to Congressional ineptitude, mainly Republican, and their refusal to DO THE WORK. Spineless Democrats. Dogmatic, ignorant Republicans.
Oh, and the cliff part? Not a cliff. More like a bunny hill, or a “fiscal incline”. Nothing happens all at once: it will be gradual, kind of like the proverbial boiling frog. And who knows? Maybe America will cowboy up and deal with whatever problems their loopy lawmakers hand them. Lemonade outta lemons, right?