Memo to the Media: There Is no Fiscal Cliff -- Stop Calling it That!
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A casual news consumer couldn't be blamed for believing that our government is re-enacting the final scene from Thelma and Louise – hurtling at breakneck speed towards the abyss. That there is a “fiscal cliff” ahead – a perfect storm of spending cuts and tax hikes that will send the economy back into recession if lawmakers don't do smething before January 2, 2013 – has become deeply embedded in the conventional wisdom.
But like so much of the conventional wisdom within the beltway media, it's also dead wrong. There is no “cliff” – it's more like a slope – and that means something quite significant: Congress doesn't have to do something – anything! – immediately. No disastrous “grand bargain” needs to be cut during the “lame duck” Congress following the presidential election. The federal budget simply isn't a fast-moving train.
Last week, widely respected budget nerd Stan Collender came on the AlterNet Radio Hour to explain all this stuff, and to talk about how key budget deadlines coming up in the next months are causing disarray within the GOP. Below is a lightly edited transcript of the conversation (you can listen to the whole show here).
Joshua Holland: Stan, first of all let’s talk about this “fiscal cliff” that has the pundits so hot and bothered. Isn’t it more of a slope?
Stan Collender: The Center on Budget and Policy Priorities in Washington was the first to point this out. In the aggregate, the tax increases and the spending cuts could push us back into a recession in a relatively short period of time, but it wouldn’t happen all at once. It’s not really a cliff. It’s more of a gradual slope. In fact, if Congress and the President didn’t get things done by December 31st, when we supposedly hit the “cliff,” they’d still have three or four weeks before any of this would really start to kick in and have a real impact. In other words there’s plenty of time to do things. We don’t have to rush into a bad decision by December 31st to avoid what sounds like a tragedy on its way.
JH: This is always the way we see these things. We must do something now, even if it’s a bad something. I think that that’s a dangerous idea to have out there.
SC: Before you go on. Remember the “fiscal cliff” -- that phrase -- was an invention of Ben Bernanke. He didn’t want to say what he really needed to say, which is that the policies in place now will cut the deficit too far and too fast. What he was really saying was don’t cut the deficit. We need the deficit to be higher and not lower. If he had said that, though, he would be target practice for the Republicans.
JH: The other thing I find problematic with the image of this cliff is that a cliff is a natural object. In reality there’s nothing that Congress passes that it can’t un-pass, short of a Constitutional amendment.
SC: In theory, that’s correct, but these days it’s not clear you can get a majority in the Senate to proceed to the reading of the Lord’s prayer. So doing anything on the budget might be a problem.
JH: Right and I’m going to get into that. You’ve written some really important pieces on that very subject, which I want to talk to you about in a bit.
But first, can you just give our audience a very brief summary of what is going to happen if Congress doesn’t act? I mean, theoretically if Congress did not act, what does this fiscal slope entail?