Over the Cliff

I was watching Fox News this evening.  Yes, they’re a mouthpiece for the Republicans, but that can be helpful sometimes.  Tonight, they were rebutting Obama’s assertion that the Republicans have no ideas about how to address the deficit.

The Republicans, according to the report, are not against increasing government revenue.  The government can raise revenues by selling assets, or increasing user fees.  But tax increases of any kind, including getting rid of loopholes, regardless of how useless or stupid they may be, are absolutely off the table.

Usually, I disregard this as mere brinksmanship: they’re just playing chicken.  In New York, things like this happen with some regularity, and earlier this year, a Federal government shutdown was avoided with last-minute negotiations.

But we’re in a deep, deep hole: the Federal government is broke.  Getting out will be difficult and painful: it will take both tax increases and spending cuts, and we’re all going to get taken down a couple of notches.  We’re also going to learn the hard way that ‘entitlements’ are not ‘debts,’ and can be changed at the stroke of a pen.  In 2008, I had voted for Obama hoping that he would help us face our problems.  But he turned out to be just another politician.

We’re broke now: it’s just that we can juggle the books for another few weeks, until 2 August, before the country is officially in default.

What’s so difficult? I hear you cry.  Just raise the debt ceiling, like the last dozen times, and everything will be fine.  But the usual rationale is that after one raises the debt ceiling, the economy recovers, and the resulting growth cuts unemployment and covers the debt.  Unfortunately, that hasn’t been working for the last few years.  Our economy has lost the productive capacity that it would need to properly recover from our current situation.

So the alternatives are to negotiate some spending cuts, and possibly tax increases, and kick the can down the road for a few months, or to let a default happen.

If the default is inevitable, maybe it’s better for it to happen now:

  • We’re all (except the very, very rich) stretched now, but it will be worse next year;
  • If it happens now, we have a chance to stabilize the situation by next year’s elections.

And, perhaps, that is what is underneath the Republicans’ position.  They may want the default to take place, not out of malice, but because it is the least painful of the available alternatives.

I tend to doubt that this will be the usual game of chicken.

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