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With only a few hours to go until the end of 2012, the U.S. government seems determined to drive at full speed off the edge of the so-called “fiscal cliff,” after which a set of tax hikes and draconian budget cuts will go into effect. Those measures were originally put in place to compel President…
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Call me naive, I’m a computer programmer, not a politician: It seems to me that the previous legislation that included all the language that created the so-called fiscal cliff could simply be removed from that previous legislation, as it was only included in the first place as a means for congress to light a fire under itself and do something. All I’ve seen it do so far is create more sound bytes and hand-wringing.
We have a two party cabal in this country. It consists of two redistribution coalitions fighting over how to cut up a limited size pie. The two parties could care less about deficit reduction so long their respective coalitions get a bigger piece of next year’s pie.
The fiscal cliff was a media concoction to spread fear and sell ad space. It is more like a fiscal bump in the road and an attempt by corporate America to increase the size of the pie with higher taxes. After all the media corporations are members of the coalitions, too.
What we are in is not a recession (two consecutive quarters of negative GDP growth) and it is not a recovery. The recession was over a long time ago. So, in the context of a recession there is nothing to recover from. We are in a depression caused by a massive loss of purchasing power. It was caused by decades of stagnant wages, increasing health care costs, and 26 million unemployed. Tax policy is not going to get us out of this. It is going to take time. Maybe even decades and there will be multiple recessions within the greater depression.
The best economic course is to let the tax breaks expire and get serious about deficit reduction with the restored revenue stream, but that would mean shrinking the pie and both coalitions would have to take hits. The chances of that happening is slim and none. That is also the reason the debt ceilings has always been raised. As is usually the case with government, doing nothing is the best case scenario. That is why it will not happen. They will come up with something next year.
Have a happy new year everyone and don’t worry about this nonsense.