Fiscal cliff
| The dismal science Economics |
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| Economic systems |
| Major concepts |
| The worldly philosophers |
“”The idea [two years ago] was to create a situation so damaging, so contrary to the national self-interest, so unimaginably irresponsible that even the most hardline political zealot would have the sense to compromise in order to prevent it. Bad assumption, it turns out.
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| —Neil Macdonald[1] |
| —Blake Hounshell[2] |
The fiscal cliff (as in "jumping off the fiscal cliff") is a recurring nightmare scenario in which the full faith and credit of the United States — the backbone of the global financial system — is literally held hostage by a group of political ideologues.[3] (And, if they don't get their way, are perfectly willing to blow off $24 billion in the course of two weeks.[4])
At the heart of this now-annual episode is the United States debt ceiling, the legally-mandated upper limit on what the American government can borrow in order to pay its bills. For years, raising the debt ceiling was a mundane legislative act[5][6] that drew no particular political attention. But, as neoconservative voices and (later) the Tea Party/Austrian school economics gained increasing presence, the annual need to borrow money to meet obligations has become a partisan battleground with huge stakes: if the United States does not pay its bills, the bonds it issues will no longer be an absolutely guaranteed, rock-solid investment. The ensuing uncertainty would have... negative effects on the world economy.[7]
How this happened[edit]
In 2007, the USA fell into the worst economic collapse in 70+ years, forcing President George W. Bush and his successor, Barack Obama, to engage in deficit spending unseen since FDR to ensure that the situation would be just that — a two-year recession.[8]
However, the American conservative establishment (which awoke from the hangover of tax cuts, deregulation and military spending that made the American economy so vulnerable in the first place[9]) noticed that when the US debt reached 100% of GDP for the first time since the 1930s, they had to act to prevent their notion of small government from disappearing.[10] In 2010, a bipartisan "idea" was made to create a "fiscal cliff" — if a debt-reduction strategy of revenue increases and spending cuts were not made by January 1, 2013, then an even larger one would be implemented, risking a return to recession. (Sound familiar?)
Republicans were adamant to avoid any increase in taxes and cuts to the military; they began whining, to which Obama replied with a willingness to cut a new deal. Throughout December 2012, Obama seemed again willing to slash Medicare and Social Security as part of a "Grand Bargain" budget deal in return for modest tax increases, showing he didn't learn anything from the 2010 midterm massacre where Republicans successfully campaigned against entitlement reforms Obama offered as a compromise in previous negotiations.
Although the final deal to avert this fiscal cliff eventually did not contain any cuts to entitlement programs, Obama gave away substantial revenue savings and a return to Clinton-era tax levels, and seemed to trade away leverage for another debt ceiling fight that was coming up in October 2013. Obama initially sought revenue increases up to $1.6 trillion, Republicans offered revenue increases of $800 billion, and the final deal went even lower than that ($600 billion). Over and over Obama promised not to keep the low tax rates for people earning more than $250,000. Not only did he cave on this, but the retention of at least 85 per cent of the Bush tax cuts led some observers to re-brand the deal, officially named American Taxpayer Relief Act of 2012, as the "Obama tax cuts."[11]
October 2013[edit]
After five years in office, Obama finally grew some balls.[12]
On October 16, the House of Representatives finally caved after a two-week government shutdown and passed the Continuing Appropriations Act of 2014, which resumed federal funding and suspended the debt ceiling until February. Meet us back then.
Beginning of the end?[edit]
On February 11, 2014, over a month after the US Senate passed a budget that would flush most of the 2013 sequestration,[13] the Orange Overlord (no not that one) quietly capitulated after three years of axe-waving, allowing a clean debt ceiling raise lasting until March 2015.[14] Nonetheless, after everything that had transpired, only 12% of the entire House GOP caucus were willing to stomach reality with him.[15]
Various quotes by conservatives on defaulting on $17 trillion[edit]
“”I think it would bring stability to world markets.
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| —Ted Yoho (R-FL)[16] |
“”If you don't raise the debt ceiling, what that means is you have a balanced budget...It doesn't mean you wouldn't pay your bills.
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| —Rand Paul (R-KY)[17] |
“”Stocks rose yesterday during the first day of government shutdown. Markets like being left alone for a day.
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| —Donald Trump[18] |
“”We hit the debt ceiling, and the world won't end.
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| —Dean Clancy[17] |
“”I think it’s the dumbest idea I’ve ever heard.
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| —Richard Burr (R-NC)[19] |
“”[It's a] suicide caucus.
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| —Charles Krauthammer[19] |
“”It’s kind of an insult to lemmings to call [the Tea Party] lemmings, so they’d have to be more than just a lemming, because jumping to your death is not enough.
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| —Devin Nunes, (R-CA)[19] |
“”When Republicans run into the street despite the fact there’s a flashing red light, they’re gonna get hit by the cars and killed.
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| —Former Dubya spokesperson Nicolle Wallace[19] |
“”It’d be a good idea if they stopped referring to other Republicans as Hitler appeasers... I think if you make a mistake as big as what they did, you owe your fellow senators and congressmen a big apology — and your constituents, as well, because nothing they did advanced the cause of repealing or dismantling Obamacare.
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| —Grover Norquist (yes, that Grover Norquist[20]) |
“”America's gerrymandered primary system, which often provides a boost for the most radicalized candidates, explains much of the difference... In [the Commonwealth] comparing universal medicine to a Nazi plot gets you thrown out of the party. In the United States, it makes you the front-runner.
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| —Jonathan Kay |
A quote by Republicans on defaulting on $17 trillion, 150+ years ago[edit]
“”The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States ... all such debts, obligations and claims shall be held illegal and void.
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| —Fourteenth Amendment to the US Constitution[21] |
See also[edit]
- Obamacare
- Chinese-owned US debt
- Greece-baiting
- Path to Prosperity
- Iron law of institutions
- Innumeracy - Because America's fear of big numbers is screwing us all.
External links[edit]
- The Debt Limit Explained, CGPGrey
- Facing Facts on Fiscal Cliff, FactCheck
- Why Does Congress Suck? (Hint: the answer starts with a "g.")
- Shutdown: A fight with no room for compromise, Reuters
- Excuses, Excuses, Excuses, The New York Times
- The Shutdown Prophet, New York Magazine
- Why is comparing sovereign debt to household debt wrong? (No, Heritage Foundation, the government is not a gold-plated mansion.)
- This Baby Bargains Like The Tea Party
- "You shut down my government because I wouldn't trade you my Charizard?"
- We hope you had the time of your life.
References[edit]
- Lawrence Rosenthal (2013). "The Tea Party, the government shutdown, and Obamacare." The Foundation for Law, Justice and Society, University of Oxford.
References[edit]
- ↑ Fiscal showdown at the U.S. Congress, CBC
- ↑ Shit, they figured us out!
- ↑ Meet the 32 Republicans Who Caused the Government Shutdown, The Atlantic
- ↑ U.S. shutdown cost the economy in 4 ways, CBC
- ↑ Guess who raised the debt ceiling 17 times?, Washington Post
- ↑ Willing to deny this?
- ↑ It's the equivalent of giving the finger to your mortgage on a macroeconomic scale. (And the assurance that China would be the the single global superpower for much of the 21st century.) Some explanation from the Treasury Department.
- ↑ US Business Cycle Expansions and Contractions, National Bureau of Economic Research
- ↑ Reflections on the Causes and Consequences of the Debt Crisis of 2008, University of Wisconsin-Madison
- ↑ "The problem Republicans are having right now is an outgrowth of a longer-term issue they've had ever since the 2008 elections: the GOP does not really have much of a policy agenda. For the past five years, the party has been defined almost entirely by everything it is against. Mostly, it is against Barack Obama and whatever he is for. And here, Mr. Obama's tendency to play the reasonable moderate sometimes becomes a problem." [1]
- ↑ In typical modesty, the American business community decried the deal that handed them billions in taxpayer-funded gifts because it represented a missed chance. Business leaders specified that "serious tax and entitlement reform" (read: more tax cuts) was not achieved and they pledged to lobby D.C. in the coming months to fulfil the wishes of the Masters of the Universe. [2]
- ↑ Deal with it.
- ↑ Obama signs bipartisan budget deal, annual defense bill, Reuters
- ↑ The Debt Ceiling is Now Pointless, The New York Times
- ↑ The 199-member Hall of Shame can be found here.
- ↑ "He's right. They'd all stabilize around rock bottom."
- ↑ 17.0 17.1 Oh yes. (Apparently Forbes loves inefficient, ultra-expensive healthcare. Who knew!)
- ↑ Well, if losing over $1 billion is your definition of "left a lone for a day," sure.
- ↑ 19.0 19.1 19.2 19.3 The Meanest Things Republicans Have Said About Republicans This Shutdown, The Atlantic
- ↑ Tax cuts.
- ↑ It probably won't come down to this.