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To the Cliff of Death...Again
Talk about having it stacked against you…
That’s like relying upon a bamboo room divider to protect you in a hurricane.
Not familiar with the approaching sudden-death syndrome facing the US economy?
Don’t feel too bad. You could have easily missed it in all the excitement of the 1-year anniversary celebrations of the Osama bin Laden killing and the general noise of the Romney v. Obama face-off coming this November…
But the fact remains that the “fiscal cliff” is out there and we are all scheduled to go over it together come January 2013. Why will that happen?
Well…let’s let Ben Bernanke’s boys tell us what this upcoming thriller is all about…
Super Committee’s Super Failure
Charles Evans of the Chicago Fed called it a “big uncertainty” while Atlanta Fed President Dennis Lockhart referred to it as a “financial shock” to the markets. Both warned that the US could be heading for a fiscal cliff at the end of 2012 if scheduled tax increases and spending cuts are allowed to happen. And both, apparently, are in anticipation of Congress doing nothing to avoid the cliff.
But what’s the cause of this looming ledge of death and destruction to the American economy? And who’s at the wheel, anyway?
Congress, of course.
Hey, they’re just doing what they do best, which is paper over a problem until that lobbyist position opens up, where some of them can finally make some real money.
Alright, to be clear and fair, it was the “Super Committee” selected from Congress that was charged with solving the debt-ceiling problem that never seems to go away.
But this time, we are told, it’s different…
And given the trillions of dollars of debt that we’ve taken on the past 3 ½ years, who can doubt it?
But if that’s the case—and I don’t doubt that it is—then why isn’t there more action in Congress and from the White House to solve this issue right now?
Seems to me if I’m running for re-election, this is a perfect way for me to show you why I’m your guy.
One reason springs to mind: there’s no drama or political benefit in fixing a problem too soon.
And I understand that. If you’re Congress and you all solve this problem today by being responsible, it’s off the headlines after a day or two and then you might have to make more responsible decisions…
That would be a nasty habit to fall into.
Especially when the responsible thing to do when you face huge federal deficits is to…cut spending.
And who wants to do that?
Certainly not any member of Congress who has to face voters who depend upon government spending to make their nut every month. That’s political suicide.
But on the flip side, the Bush tax cuts are also scheduled to sunset at the end of this year, too.
For a president and much of Congress that rode into office blaming the Bush tax cuts as part of the problem…
Keeping lower taxes in place is also a big problem. It makes them look like they really don’t care for the 49% of American households who don’t pay any federal income taxes, but that do receive some kind of federal benefit.
Not raising taxes on us working stiffs is just not right, not fair, and not what folks across this great nation—dead or alive, real or imagined--voted for in 2008.
So when it’s put in those terms, the fact that the “Super Committee” failed in its goals of solving the budget deficit makes perfect sense…
Political Costs Too High
In fact, now that I think about it, it makes perfect sense not to solve the budget deficit issue at all.
Who wants that achievement hanging over their head for the rest of their life?
From that point of view, it’s completely sensible that we not solve our major problems; whatever happens, someone’s constituency loses.
There’s only one fly in the kick-the-can-down-the-road ointment…
And that is the reality that on most fronts, the economy is slowing down. Not just in jobs, but also in falling income levels, falling consumption levels, rising energy costs and an interest rate climate that can remain low for only a little while longer.
And when interest rates do rise, the cost of the debt will triple or even quadruple almost overnight.
But in the meantime, no hurries, no worries…
The fiscal cliff that the Fed boys warn us about is several months away.
That’s plenty of time to muddle through the rest of the year—at least until November 6th—and then they can think about considering options that may be politically possible for a lame duck Congress--and maybe even a lame duck president with his legacy on his mind--to deal with.
But will things get even worse by then? Or will the economy show better numbers that are truly based upon reality and not spin?
Will the stock market, not to mention our credit rating, tolerate another nail-biter on the debt-ceiling negotiations?
Why the hell not?
Seems like we’ve been there so many times before…
It’s like watching sequel after sequel of “Indian Jones and the Temple of Fiscal Doom.”
There are tons of thrills, spills, scares and surprises just up ahead in this watershed year of 2012 as America once again faces the Fiscal Cliff of Death.
So stay tuned, folks; you may be scared to death, but at least you won’t be bored.
Think that’s a bit much?
Maybe; but I doubt it.
In either case, don’t blame me; I just write about the drama, I don’t direct it.
Besides, everyone likes a cliffhanger, don’t they?
Pass me the popcorn.
And those are…The Gorrie Details.