The Phony Fiscal Cliff
August 10, 2012
by William P. Meyers

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Cliff ahead! Turn left! Turn right! Dig in your heals! Don't stampede over it like a bunch of cattle!

Here on Highway 1 in Northern California cars going over cliffs is a too common occurrence, right up there with drowning while trying to pick "free" abalone out of the ocean. Most of us have seen cowboy movies where cattle stampede over a cliff. We know cliffs are bad news.

For a couple of months now there has been a new scare tactic with the American economy: the Fiscal Cliff. Whether it is real or not, enough yodeling about it has already been done to cause some business people to restrain their hiring and purchasing. This hurts the economy immediately, lowers tax collections and raises government expenses, and may cost Barack Obama enough swing voters to make him a former President come 2013.

The fiscal cliff is a sham, but it is a sham that serves the purpose of a number of special interest groups. They want to turn the fiscal cliff into a bridge to their own profits, at the expense of everyone else.

The fiscal cliff is supposed to have two real components. One is the end of the Bush (President George W. Bush) tax cuts. This will increase federal income taxes for most citizens who pay those taxes. The biggest tax increases would be for those making over $250,000 per year, because they got the biggest cuts under the Bush tax plan. The theory is that this class of people, justifiably called the Ruling Class, will have less money to spend and invest if their taxes go up. They might hire less new workers, or even fire some current workers, in order to keep up their expensive habits like high-class prostitutes, coke allowances (trust funds) for their children, and designer boots. Or they could keep the workers and cut their luxury spending, thus destroying millions of jobs in China and Italy.

The argument is that increasing taxes on the rich will hurt the economy, and therefore everyone. The problems with that idea are numerous. The Bush Tax Cuts for the Rich did not help the economy, so why should restoring the taxes hurt the economy? In fact, if you have had the bad fortune to be around rich people much, you know most of them have poor judgment with money. If they have less income each year due to taxes, and therefore need to think more carefully about investing and spending, that might actually improve the overall economy.

The secondary argument is that the extra taxes on those making under $250,000 will also hurt the economy.

Strangely, the same pundits (and I use that term with sarcasm) who are bewailing the possible tax increases on January 1, 2013, were screaming about the federal deficit for the past four years. According to their (probably true) economic theories, creating a huge federal debt will eventually sink the American economy. It is better for the economy to have a balanced budget, or even to start paying down the debt.

They argue that this is so important, we should toss government dependents and the poor and even the working class to the wolves, because it will be good for all of us in the long run. So they want to keep the Bush Tax Cuts and cut federal funding of just about everything that helps ordinary people: Social Security, Medicare, Food Stamps, unemployment insurance, and aid to public education.

But those federal spending cuts would also decrease demand, just like when the rich spend less. So they seem to be arguing that when the rich spend money it is good for the economy, even if it increases the national debt, but when the poor spend money, it is bad for the economy. In fact, that is exactly what their argument amounts to. And what we should do about it is drag them out into the streets, kick the shit out of them, redistribute the clothes and jewelry they are wearing, then donate their organs to someone who might put them to better use. But being a polite and perhaps cowardly lot, we will instead work peacefully through the political system to try to tax them at a rate that still leaves them far wealthier than they deserve to be.

The second branch of the Fiscal Cliff Scare is the mandatory budget cuts that were negotiated by Congress just last year. It seemed like a good idea at the time. Again, the greater danger that was sold to us, mostly by Tea Party zealots, was a larger federal deficit. I don't have an argument with that: the deficit really has gotten out of hand since Bill Clinton was in the White House. The question was not whether to slightly cut the federal budget, but where to cut. The negotiated cuts supposedly affect the military budget and the domestic budget about equally.

You can tell we are being sold a pile of bullshit by the current right-wing zealot demands: they still want to cut the domestic side of the budget. They are willing to let seniors and the unemployed sleep in the street if that would balance the budget.

But not their precious military. Oh no, every penny spent by the Defense Department is needed to defend the nation against Islamic Terror. Some turbaned dudes paddling a rowboat stuffed with Kalashnikovs and lighter fluid might slip by if we had one less nuclear-powered aircraft carrier and burn Washington to the ground, like the British did in the War of 1812.

The key swing group in this tempest in a national-sized tea cup is those Democratic Party members of Congress who, for whatever reason, support the Pentagon's mindset or are afraid they are going to be droned out of existence if they don't march in line to the Pentagon's marching band. [Note to self: these run on sentences are beyond the attention span of the home-schooled. Try to avoid them in the future.]

Allow me to be explicit. I think that letting all the Bush Tax Cuts expire, including those on the $50,000 to $250,000 per year crowd [which includes me in a good year, the last of which was 2008], will be good for the U.S. economy in the long run. I think cutting the Defense Budget is good for the U.S. economy in both the short and long run.

I think the economy would mend a lot quicker if the Republicans in the House of Representatives and Senate would stick to their so-called principles and cut the federal budget where it can be cut, where that won't hurt people, which is mainly in the Defense Budget.

Realistically, the best case scenario is inaction by Congress. The Fiscal Cliff is really green pasture. If Apple Computer and other Republican fat-cat cash hoarders would just pay their workers in the United States more, and hire more workers, the economy would start chugging along nicely. People would be able to pay a bit more in taxes to help reduce the federal deficit. A growing economy would mean more workers paying into unemployment funds, Social Security, Medicare, and income taxes.

If you care about your nation, now is the time to start looking at your choices for Congress this November. Remember, voting is not enough. Say what you think. Speaking up about politics and economics may be impolite, but it is better than the other option. If you have never given money to a politician before, you might want to try it. He (or she) might even take your calls after that.

"Young men and women, educated very carefully to be apolitical, to be technicians who thought they disliked politics, making them putty in the hands of their rulers, just like always." — Kim Stanley Robinson, Red Mars