Thursday, December 13, 2012

Why We Should (and Probably Will) Go Over the Fiscal Cliff

We can only hope. Source.

As I said more than a year ago (and continue to believe), going over the fiscal cliff isn't such a bad thing, especially when compared with the likely "compromises" offered by Republicans.

As I said a few days ago, the much bigger threat is the economic terrorism that the Republicans are currently threatening the country with - i.e. refusing to raise the debt ceiling.

Obviously, all of this has been on my mind a good deal in the past couple of weeks, so I figured I'd gather a few of my thoughts together to explain why I think we should (and probably will) go over the fiscal cliff:
  1. Most importantly, the Republicans haven't offered anything that is even a remotely better option than going over the fiscal cliff, from my (and, I hope, Obama's) perspective. The most I've heard them grumble about is giving a couple of percentage points on tax rates for the wealthy, and in return demanding ridiculous cuts to Medicare, Social Security, etc. etc. Why in God's name would Obama agree to any of that, when he can just wait until Jan. 1 and get higher tax rates on the wealthy without giving up anything in return? And on Jan. 1, he can immediately turn around and demand tax cuts for the middle class, which the Republicans will be in absolutely no position to resist.
  2. I don't see the Republicans being willing to offer enough to make a deal better for the Democrats than going over the fiscal cliff. I think the spending cuts in the fiscal cliff - to defense, to Medicare providers, and across the government - are actually spending cuts that many Democrats aren't terribly sad to make. Anything the Republicans offer is probably likely to be even more distasteful than the cuts in the fiscal cliff.
  3. In fact, the only thing I can think of that might possibly make me willing to agree to a deal before Jan 1 (if I were Obama) would be to permanently repeal the debt ceiling, which I doubt the Republicans will agree too, since they are intent to use the debt ceiling as a weapon of economic terrorism to push through their unpopular policies against the will of the American people. It's a powerful weapon (even if it does show that they're not fit to govern), and they'll be loathe to give up such a powerful weapon.
  4. If Obama strikes any kind of fiscal cliff deal that DOESN'T include a permanent solution to the debt ceiling, he's a terrible negotiator, and I'd question his fitness to conduct foreign policy, as such a terrible negotiator.
  5. Not only are we going to go over the fiscal cliff, but we may also have the mother of all government shutdowns in February or March, if we don't have a resolution to the debt ceiling and if the Obama Administration proves too chicken to ignore the debt ceiling altogether (which would be my approach, but thankfully, I'm not the President).
  6. If we reach the debt ceiling without the Republicans giving in and without Obama being willing to ignore the debt ceiling, the stock market will crash, the financial system will melt down, and it will be September 2008 all over again.
I'm seriously debating moving my retirement account into an all cash position until this blows over in the spring - what do you all think?

For more thoughts on why Obama must go over the fiscal cliff to save his second term, check out this rather insightful article from TNR.

I've also been having some fun thinking about what 30-40% of the federal government Obama would/should shut down, if Obama decides to shut down large parts of the federal government when we reach the debt ceiling. There are two tracks Obama could take - (1) try to minimize the disruption to U.S. citizens' lives, at least the short term, or (2) maximize the disruption to U.S. citizens' lives, to put as much pressure as possible on Congress. Since the former is rather boring, I've mainly been thinking about the latter:
  • Shut down the entire U.S. military!
  • Stop sending out Social Security checks!
Actually, those two would get us past the 30-40% of the U.S. budget, and everyone would FREAK OUT at Congress and tell them to fix the situation.

If we reach the debt ceiling, the Obama Administration will have lots of latitude as to WHICH parts of government they shut down - even though they won't, it's fun to think about the possibility of the Obama Administration doing something as extreme as shutting down the whole U.S. military and stopping Social Security and telling people to call Congress if they have a problem with that.

Perhaps the Republicans should be a little more careful with the debt ceiling - they are definitely playing with fire, gasoline, and a bazooka.


  1. Lots of commenters in the blogosphere are suggesting that the government simply stop sending checks to zip codes in Republican Congressional districts. What do you think? Would that work?

    1. Joe: Hmmmm, I'm not sure, honestly. I had thought about something like stop providing federal funding to "red" states, which would be much easier to pull off logistically, and perhaps legally as well. But, it would be much more effective to target Republican Congressional districts, undoubtedly.

      Furthermore, the Obama Administration might just have the power to pull off such a move. Congress will already be forcing the Obama Administration to break the law one way or another - it would be the height of hypocrisy to turn around and complain that the Obama Administration is breaking the law in an "unfair" way that punishes "their" districts.

      However, I doubt the Obama Administration will have the balls to engage in that kind of collective punishment of conservative voters in order to pressure Congressional Republicans - nor am I convinced that it would be a terribly smart political move, regardless of its effectiveness.

      -The Angry Bureaucrat

  2. The disruption to citizens lives need not be tremendously complicated. From the FAA shutdown because of the collective brinksmanship in Congress that couldn't get a Federal Aviation Administration authorization bill out last year individual "overpaid, underworked, useless" feds, who weren't locked out, were told to work without pay and pay their own expenses for temporary duty travel to keep the aviation system running. And they did. Showing much more selflessness than the Congress, public spiritedness than their political masters in the Executive branch, and character than much of the general public, at least those who think they are overpaid, underworked and useless. This time if these few thousand controllers, operations inspectors, and airway facilities technicians just said "no appropriation no work" this whole thing could be over in a day and the country would see how overpaid, underworked and useless they are. Some people are so enamored of Europe and European best practice like austerity etc they could pretend they were in France. The good part of this is the disruption would fall disproportionately on the (relatively) upper income population that can afford to fly, not take the bus, or be flown on their own corporate jets, or send/receive their frightfully important stuff via express package services. Unfortunately it would also ground shipments of medicine, blood and blood products and transplant organs, let alone sick people who need to get to treatment facilities. Maybe the Air Force might have a plane or two available for this kind of thing, after all they do not have to worry about operations inspectors and certificated air carrier regulations.

    1. Anonymous: Indeed, going over the fiscal cliff or hitting the debt ceiling need not greatly inconvenience the U.S. public, at least in the short-term - but since Obama was just reelected and there aren't any national elections for two years, isn't this the best time to have a huge fight and inconvenience the American public as much as possible, and make them seriously experience what the Republican ideal of "limited" government would look like and make them decide what they really want?

      -The Angry Bureaucrat

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