Imagine if either President Obama or Senator McConnell went on television and said the U.S. should return to the tax policies of 1998, when the President was a Democrat, the House Speaker was a Republican and the unemployment rate was 4.4%. Furthermore, what if that same leader said we should cut the defense budget to the 2006 level, a time when we were engaged in heavy ground combat in both Iraq and Afghanistan. These are the policies that will be put in place if nothing is done to avert the Fiscal Cliff. Would anyone panic if either of these policies were put in place? Would any rational person describe returning to either of these times when the U.S. economy was functioning well as a “cliff”? Yet, we hear an increasing drumbeat that we are heading for outright disaster unless something is done.
Returning the country to sensible economic policies would not be a disaster. It would not be change on the scale of a towering cliff of doom. Instead, the cliff is really a fiscal pothole our leaders have created in the middle of the road to the future. Admittedly, mandating that these policies change in such an immediate and machete-cut fashion is idiocy but wouldn’t we all be better off if the current tax and spending policies were adjusted to a more fiscally responsible level? Yes, defense sequestration (in the form of across-the-board spending cuts) is incredibly stupid because it doesn’t allow the military to either plan for or customize the shape of the reductions. But it’s stupid not because of the scale of the cuts, but because of the mechanics – can anyone argue that we couldn’t adequately defend the country at the 2006 level of spending?
The only theatre here is whether our leaders can steer our rusty, leaking jalopy of an economy around the pothole they’ve created. Because the fiscal cliff is not the real issue here. The noise about it obscures the real issue blocking the road to a brighter future – the massive mountain of entitlement debt that looms over the road, representing a real crisis for the U.S. The nonpartisan Congressional Budget Office (CBO) has stated that our ballooning national debt will be nearly twice the size of the national economy in the next twenty five years. At that point, we will be lucky to escape a real disaster on the scale of what is going on in Greece. To get past that mountain of debt will take political leadership, capable of sacrificing the sacred cows of Medicare and Social Security spending, increasing revenue through tax increases on more than just the 1%, and perhaps most importantly, readiness to accept short-term pain for long-term gain – anathema to politicians seeking reelection.
If we are able to make those changes, we are more likely to finding ourselves driving a racecar economy instead of the current rusted-out piece of junk economy, and we’ll be likely to get over that mountain of debt.