Later On

A blog written for those whose interests more or less match mine.

The Fiscal Cliff deal and the damage done

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A very interesting article in Bloomberg Businessweek by Peter Coy:

Ordinarily we call a deal in which neither side gets what it wants a victory for democracy. Shared sacrifice produces moderation and probity. But any process in which the Speaker of the House tells the Senate Majority Leader “Go f-‍-‍- yourself,” as John Boehner instructed Harry Reid at the height of fiscal cliff madness, deserves just a bit of examination.

The Jan. 1 deal, which Wall Street cheered, moderates tax increases and spending cuts that would have amounted to more than $600 billion in 2013. It’s worth noting, though, that the fiscal cliff was the mooncalf monster-child of Congress itself. The automatic spending cuts (“sequester”) were invented by an act of Congress a mere 17 months ago after the 2011 debt ceiling showdown. To praise this new deal as an accomplishment is to praise an arsonist for extinguishing his own fire.

Congress voted to permanently preserve the Bush tax cuts for roughly 99 percent of taxpaying households, but the rate increase for the 1 Percent has infuriated antitax purists, who vow to exact more spending cuts in a couple of months, when the U.S. faces the triple threat of a debt ceiling, postponed automatic spending cuts, and expiration of the law that keeps the government funded. The arsonists now have a new box of matches.

Why have Americans been sentenced to this years-long cycle of pettiness, delay, and zero-sum gamesmanship? You could argue it’s a crisis of leadership—that our elected representatives are examples of our worst, most partisan selves. That seems unlikely. Rather, the budget conflict, at its essence, is a clash over something that rarely lends itself to compromise: morality. Budgetary puritans believe, ferociously, that too much government spending is not just inefficient, but self-indulgent. They view the world’s largest economy as an indebted family that needs to get back to basics. “The federal government needs to tighten its belt just like every hardworking American family has had to do during our economic recovery,” Representative Kurt Schrader, a fiscally conservative Blue Dog Democrat from Oregon, said last year.

The economy-as-family metaphor is familiar, emotionally intuitive—and incorrect. It’s a fallacy of composition: . . .

Continue reading.

Written by LeisureGuy

5 January 2013 at 12:21 pm

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