Now that the national elections have finally played out there is much talk about the financial cliff. That is the mandated 10% budget cuts and letting the Bush administration tax cuts expire. It seems most of the media treats this event as some sort of catastrophe but in my usual contrarian ways I just don’t see it that way. Even though I am strongly a social progressive, I am also a fiscal conservative. So here is my take on this matter.
Given the partisanship in Washington today, and I don’t think contrary to some opinions that it will somehow disappear after the elections, I think the best way to deal with the Bush tax cuts is to let them expire on December 31. Then if there is any consensus, and I’m pretty sure there will be, bring back the cuts for the middle class. Given that all the Republicans have been to the altar of Grover Norquist I don’t see enough of the GOP coming around to tax increases. Since the taxes are automatically raised to pre-Bush levels that will be the easiest thing to happen. Then on January 1, 2013 everyone can get credit for lowering taxes on the middle class. Why fight battles we don’t have to. Let them expire and then put some back.
On the budget cuts, this is probably the best thing to happen when it comes to our military budgets which are half of the amount affected. We spend more yearly on our war machines than practically the rest of the world combined. We simply can’t continue to do that given our ever-increasing deficits. President Obama stated during the campaigns that he wants to put in our resignation of being policemen of the world. If we do that we can very safely cut our military budgets by 10% next year and even another 10% for each of the next four or five years. Can you imagine the effect that would have on reducing our borrowing?
When it comes to the other budgets a 10% cut, while causing some hardships, would not be catastrophic. There are probably millions of families out there that due to job losses have faced much higher family budget cuts. Given all the waste that is almost endemic with government spending surely they can find ways to make the cuts. The budget cuts are similar to telling a family that we know you spent $100/week on groceries this year you will have to get by on $90/week next year. That is not a catastrophic reduction.
I know there are those out there that scream it will put us into another recession! But how do we stop our incessant borrowing if we don’t find ways to spend less? Ten percent is not a bad way to start. If our economy depends on us constantly spending more than our income then is there no end in sight for our increasing deficits? We need to come to terms with this if we are ever going to put our economic house in order. We can’t just continue to buy things on credit just to keep the status quo.
I can agree that this is a fiscal cliff. It is the depth of it that I question. Is it a six-foot cliff that might cause a few sprained ankles or a one hundred foot one? Maybe we need a few sprained ankles in this situation.
But just being an ordinary guy what do I know.