It’s Time to Pay the Piper

4 Comments | Category: General

Although it is an unpopular idea, I believe that the so-called “fiscal cliff” is the only option on the table for addressing the long-term financial health of our country. Likewise, despite the temporary pain associated with going off the cliff, it may be the only mechanism capable of forcing fiscal discipline on recalcitrant Washington politicos.

Rather than referring to this as the “fiscal cliff,” perhaps we should call it our “fiscal reality.” We know that the options before us—ending the payroll tax holiday, allowing the Bush tax cuts to expire, and embracing the budget sequester—are painful. However, they are necessary for improving our chances for a vibrant, healthy economy.

According to Temple University law professor Jan Ting’s, convincing and concise op/ed in the Nov. 28 edition of the Philadelphia Inquirer, compared to what we get with the cliff, “It would be worse if Congress extended all the Bush tax cuts and repealed its commitment to cut spending. That would ensure that the government’s $1 trillion annual budget deficit would continue to accelerate, and the $16 trillion national debt would continue to expand.” I concur with his well-informed view.

Let’s take a closer look at each of the three key items affected by the “fiscal cliff.”

First, according to the National Committee to Preserve Social Security and Medicare, the continuation of the payroll tax holiday is a “diversion of funds” which “poses a long-term threat to the Social Security program and does not provide the most effective stimulus.” By continuing to allow Americans to withhold payroll taxes we are intentionally diverting funds away from Social Security, creating a new crisis in the process. Because our politicians don’t have the spine to address this topic on their own, the “cliff” does it automatically.

Second, the 2001 Bush tax cuts have been a key driver of our burgeoning deficit.  An April 2011 Pew Charitable Trusts report found that 40 percent of the deficit’s growth between 2001 and 2011 “was the result of tax cuts enacted after January 2001.” Teresa Ghilarducci of the Schwartz School for Economic Policy Analysis wrote last year that “if all Bush tax cuts were allowed to expire it would cut the deficit by $226 billion in 2015 or by a whopping 54% of the total projected deficit” in that year. There doesn’t appear to be a way to adequately address our fiscal problems without allowing the Bush tax cuts to finally expire.

Lastly, the $1.2 trillion dollars in savings over ten years brought about by the sequestration is a necessary evil. While President Obama and Speaker Boehner are being lambasted for failing to reach a “compromise” to avoid the sequester, it is important to note that sequestration was the original deal! According to Professor Ting, since “neither a congressional ‘supercommittee’ nor Congress itself could designate the cuts by the end of 2012, they would happen automatically, divided evenly between defense and non-defense spending.” I’ll say it again: the sequester is the outcome of the initial deal and ought to be preserved in its entirety.

Let’s be very clear about something. Powerful politicians from both parties and ill-informed commentators within the Media Entertainment Complex have gone above and beyond the call of duty to scare the daylights out of the American people about this situation. By invoking the idea of going over a cliff, the pols and the press have deliberately convinced many Americans that these tough, yet crucial choices can somehow be avoided.

There are a number of culprits to blame for why we aren’t having an honest discussion about the “fiscal cliff” or about why going over the cliff is the only serious option on the table.

  • As usual, the politicians don’t want to be perceived as taking anything away from the voters for fear of retribution in the next election. They lack the courage to make the tough choices and to level with the voters about the actual consequences of decisions they have made on the public’s behalf.
  • The politicos have convinced Joe Sixpack that he can happily have both guns and butter without ever paying the bills. The public doesn’t want to cut entitlements. They oppose defense spending cuts. Electoral insurrection may occur if any politician even suggests increasing taxes to pay the bills that have been piling up.
  • The instigators in the press stir the public’s passion rather than provide the facts. They continue playing along with the charade, telling people that if the pols don’t cut a deal they will have to give up all their guns and all their butter, hurtling over the “fiscal cliff” tied to an anvil and bound in dynamite like Wiley Coyote in a Looney Tunes short. Meanwhile, very few in the press corps bothered to blow the whistle on the reckless policies that have helped place us in this conundrum.

The bipartisan effort to spend exorbitantly while simultaneously cutting taxes without considering the consequences has finally caught up with us and our leaders. The fickle public can no longer expect to escape the blame for demanding free guns and butter. Our politicians can only be blamed for so much. The buck stops here, with citizens like you and me, which is why we must hold their feet to the fire and acknowledge the cliff’s inevitability.

The “fiscal cliff” is not a pretty option, yet I am convinced that it is the best available course of action for our country. Our decade-long holiday from economic reality is over. Reality-based decisions about our long-term finances are required to put the ship of state on a safe course. Simply put, it’s time to pay the piper.

 

 

 

Category: General

    4 Comments so far


  1. Bob says:

    Well presented article. Although I believe that the phony “cliff” will be avoided by a last minute deal, leading us further along the trail of woes is also a fraud of gigantic proportions.

  2. Tony West says:

    I can live with the fiscal cliff. If I had the luxury of planning this event apolitically, I would start the 250k+ tax restoration in Jan 2013; wait one year hoping for any sign of steady economic growth; then restore the old tax rates for the under-$250k’s in Jan 2014. Alas, I lack Mohamed Morsi’s powers to deal with this stubborn political impasse.

  3. John C. Berg says:

    Nice to see you agreeing with Robert Reich, at least as far as your initial recommendation goes. I think you part company with him after that. As for me, I agree about ending the tax cuts, but I think the economy is a little too shaky to sustain that level of spending cuts right now. My preference would be to spend the money on much more targeted job creation – fixing our roads and bridges, building more high speed rail, hiring more teachers — in other words, more of what the ARRA did, but more focused. That would increase the deficit short-run, but should generate more revenue in the long run.

  4. Dick Miller says:

    Nathan — As usual you make sense. Is this why during the campaign we talked more about funding or de-funding “Big Bird” than the entire national debt mess? A “pox” on all their houses!

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