"Now that the elections are over, the fighting has really begun," says Megan McArdle at The Daily Beast. Republicans and Democrats are "playing a game of chicken" as they argue over a deficit-reduction agreement that will be necessary to avoid going over the fiscal cliff on Jan. 1. The Left is insisting on hiking tax rates for the wealthiest 2 percent of Americans, who make $250,000 or more; the Right is demanding deep cuts to Medicare, and extending Bush-era tax cuts for all; and both sides are waiting for the other to flinch first. "Going over the cliff would suck more than $600 billion worth of fiscal stimulus out of the economy in 2013 through a combination of tax increases and spending cuts," which "would be disastrous for everyone, including, one assumes, the politicians who lead us over the edge." But maybe it's the only thing that will scare everybody into attacking our real problem, which is that we're piling up a dangerous amount of debt because our government spends too much and takes in too little in taxes. McArdle explains:
Even a brief dive — a bungee jump, if you will — would be scary indeed. In its latest projection, the Congressional Budget Office predicts that the post-cliff economy would shrink for the first half of the year, at an annualized pace of 1.3 percent. While recovery should come in late summer, growth for the whole year would be a meager half a percentage point. That's a pretty grim picture given the still-sluggish state of the economy.And yet, our fiscal situation is so crazy that a few analysts have begun suggesting that maybe, just maybe, going over the fiscal cliff is our best hope. Bruce Bartlett, a former Reagan administration official and latter-day critic of the GOP's profligate spending during the administration of George W. Bush, recently wrote for The New York Times website about The Fiscal Cliff Opportunity. Peter Schiff, the head of Euro Pacific Capital, has been even blunter. The biggest risk is not that "we go over this phony fiscal cliff," Schiff said in a recent interview. "It's [that] the government cancels the spending cuts, cancels the tax hikes... [and] instead we end up going over the real fiscal cliff further down the road.""In fact," he added, "the real fiscal cliff comes when our creditors want their money back and we don't have it."
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