We are once again on the precipice of the so-called Fiscal Cliff. Our bill is due January 1st and Congress must deliver. The gravity of the government budget is no laughing matter, but the discussion completely misses the mark. Here are 7 opinions I would totally ignore on the fiscal cliff:
1) Republican Equals Austerity
Mainstream media will certainly have you thinking that it is those pesky tightwad Republicans holding up a deal. This is much too naïve; even the most conservative recent presidents have left a legacy of "deficits don't matter." This certainly includes the last Republican President George Bush and House Speaker John Boehner, who are both not averse to big ticket spending. Although, Boehner has played the role of an austere republican, neither Boehner nor President Obama intend to have any big cuts anytime soon, since most that are on the table won’t take effect till 2022.
2) Warren Buffet the Tax Genie
Warren Buffet, the self-made billionaire who better exemplifies tax piety than any other. Being one of the main beneficiaries of the bailout makes it difficult to hear him wax and wane about increasing taxes. Now, however, it is the estate tax he is shamelessly promoting.
Taxpayers pay many forms of taxes for their entire working lifes, for their labor, spending, and leisure. We shouldn't also have to pay taxes in in death. Such capital accumulation is good for an economy, and should be invested to benefit their loved ones. When they can no longer pass it on, the economic incentive is to squander it, which contrary to the Federal Reserve economists, is not good for the economy.
3) The American Public
Washington Post’s poll shows that although 41% of Americans support both tax revenues and budget cuts of equal proportions, 47% think there should be more spending cuts. Reasonable, but there is absolutely no agreement on what to cut. Both the Washington Post and McClatchy polls show that any changes to Medicaid encounter extreme opposition and social security cuts are also rather unpopular. The only point of agreement is letting the tax hikes expire, but only 10% thought that there should be more tax increases relative to spending cuts.
4) Obamacare Will Reduce The Deficit
Apparently there are cost controls for Medicaid and Medicare that could supposedly lower the deficit. House minority Leader Nancy Pelosi and others technocrats forget that every other Medicaid and Medicare cost control has seen little to no cost reduction and in some cases, higher costs. The only way the government has successfully reduced government spending is by not spending, full stop.
5) Krugman the Phanton Menace
Not only is Nobel laureate Paul Krugman the most outspoken accolade of the Federal Reserve, he is also extremely wishy-washy in his economic analysis. He says we are not Greece because we “literally can’t run out of money” we “can [just] print the stuff.” No worries about hyper-inflation since the “economy is still depressed.” He then calls our budgetary crisis a “phantom menace.”
On the other hand, in 2003, Krugman had completely different analysis. “I'm terrified,” he said, about the result of “skyrocketing budget deficits” and “fiscal train wreck” on interest rates. That was for a 10-year deficit of only 1.8 trillion! In another article, Krugman calls their proponents “feckless” and says these policies will lead to a “fiscal crisis.” Krugman seems to tailor his analysis for the regime in office.
6) The All Watching Bernanke
Ben Bernanke, the Chairman of the Federal Reserve, for once acknowledges that there is a limit to the power of the Federal Reserve. He fears that if we are to go over the fiscal cliff, the monetary “tools are [not] strong enough to offset the effects of a major fiscal shock." He is certainly right that he cannot depress the interest rates or the reserve rates any lower to splash water on this credit inebriated country.
A forthcoming admission is his complicity in facilitating our government to the edge of the abyss with cheap credit. By lowering interest rates well below the market rate, they have looted the savers and engorged the government on the artificially inexpensive credit.
7) Liabilities What! Who Said That?
Unfunded liabilities. The elephant in the room is only given a sparse mention and then ignored. Unfunded Liabilities do not even appear on the official government balance sheet like any public company is required to do. The current estimate is 86.8 trillion well beyond the nearly 16 trillion dollar deficit that most people are aware of. This is unfathomable since the world GDP is only about 70 trillion dollars.
Our current liabilities are so untenable that the 20-years to balance the budget discussion will soon turn into our government is burgeoning on complete and utter bankruptcy if not seriously dealt with now.