By Ralph Schwartz
Before this morning, I’d assiduously avoided reading much about the looming fiscal cliff, and now I know why. Sub- or semiconsciously, I realized the debate is pure political showmanship. (Kind of a “He (Boehner) said, she (Pelosi) said.”) Not interested.
But it’s worth asking: If we fall off the cliff, what will happen?
It appears that indeed, Congress won’t do anything before the New Year to avoid the cliff.
Bear in mind the cliff is not directly about the debt crisis. First and foremost, it is a set of steep revenue cuts and tax increases intended to address the debt problem. Observers seem to take it for granted that if these cuts/increases go into effect, the economy will slow down.
Here’s the nuts and bolts of what the cliff entails, with limited discussion of what will happen to the economy after.
Why the concern for an economic slowdown or even a recession? For one, taxes for 90 percent of Americans would go up by $3,446 on average. On the expense slashing side, unemployment assistance would end for some, salaries of federal employees would decrease, student loan programs would receive less funding, etc. Many safety net programs, such as Medicaid and food stamps, can’t be touched.
What might be lost in all the hand wringing is the fact that the fiscal cliff is an artificial construct that politicians can postpone with a wave of their hands.
Oh, and the Treasury Department just announced that the debt ceiling will be reached on Monday, Dec. 31, meaning the department must take “extraordinary measures” to borrow enough money to get the U.S. through the first two months of 2013. Then, the concern becomes the country defaulting on its debts.
Unless, of course, Congress and the president agree to take action.
Happy New Year, everybody.