How To Think About The Fiscal Cliff

Dr. Steve Conover has written for novices, overviews of how to think of the fiscal cliff.  He writes for The American Enterprise Institute’s public journal ‘The American’.  Chronicling his writings on fiscal and macroeconomics brings one to recognize the supremacy of brevity.  His ‘The Buffet Rule, What Our Grandkids Actually Want, & ‘Why Growth Matters More Than Debt’ are a few of his articles for those interested in sharpening up their rhetorical skills.  His latest, “How to Fix the Debt Ceiling (A Bigger Threat than the Fiscal Cliff) was out on November 17, 2012.  A summary for those new to fiscal or macro thought.

To Dr. Conover, the fiscal threat is real, but it must be understood from within its intrinsic merit.  Unfunded fiscal liabilities are real.   So is anemic growth.  Both threaten the sovereignty of the United States.  However, like a car odometer that crosses 100k, we should know the difference between reality and accounting.

The ‘Fiscal Cliff’ is a political weapon.  A real weapon.  If the United States loses its status as the world’s reserve currency, then every single American citizen will be pauperized immediately.  PERIOD.  However, prudence dictates that a more somber view of examining the dominant philosophy of the governing majority is more proficient as we wade into a lost decade.

Dr. Conover isn’t saying that the ‘fiscal cliff’ isn’t real.  He’s saying that a showdown is required to get a realistic budget.  A budget is a political document.  The debt ceiling is a nuke in a suicide vest.  Congress invented it, Congress is wearing it.  Only Congress can disarm it.

The most equitable way to politically go forward is to examine a ratio of GDP to debt.

Credible authorities in economics (John Taylor, Milton Friedman, Hayek, Robert Mundell, even Robert Bartley) have all commented that the ideal rato is 20%.  The United States is quickly approaching 100%.  So yes, an absolute dollar level debt ceiling is obsolete.  So is spending into oblivion!

Marc A. Thiessen has advocated that we should go over the fiscal cliff?  Why?  It would immediately lower the baseline for immediate and future budget negotiations.  We should also note that although tax cuts expire on 12/31/12, a lot of liberal tax policies also expire.  If anything, the fiscal cliff can permit Congress the ability ‘a do over’.

Its time that Congress have trench warfare over spending priorities.  The fiscal cliff is such an opportunity.

Contact Dr. Conover at his website

About William Holland

Systematic Theologian/International Relations
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