Fingernails on the Edge of the Fiscal Cliff

First, the good news on the fiscal cliff deal…

OK, there was none. So on to the bad news. A fiscal cliff deal was passed, though to call it a “deal” is a strain. It’s more like John Boehner being Barack Obama’s… well, you figure it out. In order to keep the Republicans from looking like the guy who broke wind at a garden party, Boehner did an end run around his colleagues and brought to a vote a bill that could not even muster a majority on his side of the aisle. Some of us are wondering if he even got a kiss from the President.

In the end, Congress did what Congress does best: It put off any substantive decisions until such point as they will do no good. To wit, the US will hit a debt ceiling again in about 60-90 days. Remember how much fun that one was last year? Add to that the fact that the automatic cuts that were to have been enacted were postponed (read “paid for anyway”) for 60 days. So the self-imposed restraint on Congress’s appetite for spending became like the dieter who locks the refrigerator and keeps the key in his/her pocket.

We taxpayers got dinged with a return to the pre-faux-restraint payroll tax levels, so expect to see less take-home pay this month. Curiously, the IRS got right on the guidelines for withholding. It’s almost like they knew. In fact, if you have employees, better get on the stick–you have until February 15 to comply.

Cliff hanger

Spending cuts were pretty much ignored, which brings us to the real point here. Even if everything the Republicans wanted were granted, it would make almost no difference to our long-term fiscal problems. Democrats have dug in on the entitlement issue, meaning that absolutely no adjustment to Social Security payouts or to the Medicare program will be considered as long as they breathe. Given that those two programs are the biggest drivers of our impending catastrophe, that translates into a vote for the eventual collapse of our economy. The only interesting debate left now is when it will happen.

There are solutions, but none that your regular politician will consider. The problem is that any consequences for political decisions have for years fallen far, far into the future–long after the lives and careers of legislators has ended. Social Security funds were raided and replaced with government IOUs, borrowing increased dramatically, and entitlements were established that no sane person could justify from a fiscal point of view. The guilty parties are, or soon will be, long gone.

Because of the way Congress keeps its books, much of this damage is hidden from all but those masochists who dig into such matters. Like anthropologists going though fossilized excrement, the secrets of Congress’s dark culture are only uncovered by sifting through the ****. The real culprit is easy to identify, though. Goodies people enjoy now will be paid for by our children and grandchildren. That is, if our government even exists by that time. We are leeching off the future, growing fat with the blood of our progeny. Yes, “we.” We are the ones who allow this dark masquerade to continue.

Were we to pay for our entitlements through taxes right now, we would see clearly the choices we are making. We can have a Corvette and a leopard-skin overcoat now or grocery money later. We can either look fabulous now or invest in the future. This is not the kind of economics that requires a Ph.D. to understand; anyone who can add and subtract knows this.

Such an arrangement would lead to the quickest tax revolution in the history of man. Government grows because it hides. Dragged into the light of day, it could not last in its current form any longer than a June frost. People would see the choices they are making and realize that they have been had…badly. Liberals would rather die than let this be known widely because it would remove from them the weighty self-imposed obligation to decide what is best for everyone else. Then what would they do?

Complicit in this deception is the liberal middle-class. Cloaked in self-righteous indignation that only some people get rich, the progressive army rolls on, not realizing that it will soon become its own worst enemy. The tax grenades lobbed at the jet set will quickly be tossed back by the oncoming enemy, which is government, not the guys and gals who vacation in France. Obama himself would lie on a grenade before he would give up on this petty, vengeful mission.

We were never in any danger of falling off a “cliff.” We were in mortal danger of coming face-to-face with our own childish fantasies. Had the tax cuts been left to expire and the spending cuts been enacted, we would have at least been able to take a break from our self-generated terror to look around. We would have realized that below us, about a foot-and-a-half, was the ground. Dusting ourselves off, we would have wondered how panic got the best of us and realized that we have important work to do. Calmly, with dignity and intelligence, let those of us who are not quite so rattled begin that work without the hysterical hangers-on. We can pry their fingers loose later.

About Terry Noel

I am an Associate Professor of Management and Quantitative Methods at Illinois State University. My specialty is entrepreneurship.
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1 Response to Fingernails on the Edge of the Fiscal Cliff

  1. web staff says:

    I didn’t see teacher pensions included as a big part of the problem, at least in Illinois. Of course nationally, we have all those pesky pensions too.


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