Everyone in Washington fears the fiscal cliff. The White House has no interest in going over. Democrats understand they’ll never have more power than they do now. Delaying a budget deal until after January means getting less of what they want.
Republican leaders, meanwhile, live in fear of another 1995 government shutdown. When two sides fail to reach a deal, the media blame Republicans. That’s the lesson Republicans learned 17 years ago. They shudder imagining the headlines if negotiations were to break down next month: “Norquist-controlled GOP forces America off cliff.” Nothing terrifies them more than that. They’ll do anything to avoid it, as Obama knows well. (Hence his advantage.)
The business community fears the cliff too. Federal contractors stand to lose millions if budget cuts take effect. And nobody wants to see unemployment rise or the economy fall back into recession, both of which would likely happen if Republicans and Democrats can’t make a deal.
So there’s a lot to worry about with the fiscal cliff. Congress should leap off anyway. At a full run. Face first. Yes, it’s a scary prospect. But not as scary as the alternatives.
First, consider how we got here. The fiscal cliff is a creation of the Budget Control Act of 2011, one of the most remarkably one-sided deals ever cut in Washington. Discretionary spending represents only 35 percent of the federal budget, yet the agreement calls exclusively for cuts to discretionary programs, half in the defense sector. Entitlements, the undisputed drivers of the budget crisis, remain untouched.
For the Obama campaign, the deal was a godsend. What might have been a vigorous debate over government’s growth all but disappeared until after the election. Obama was free to spend a full year attacking Romney as a handmaiden to the rich. Congressional Republicans had virtually nothing to say.
You’d think the people responsible for signing off on a deal like this would have fled to Paraguay in shame. But no. They’re still on Capitol Hill, cowering and outmaneuvered by their counterparts at the White House. In a normal year, Republicans might be able to negotiate a deal to keep the current top tax rates in place and shift some of the cuts slated for defense to entitlements and wasteful discretionary programs. (Sayonara, Obama phone.) This is not a normal year. Republican leadership isn’t just weak in this negotiation; it’s submissive. This is Fifty Shades of Grey, the Congressional edition. Leaping off the cliff is probably the best deal Republicans are capable of getting.
Hapless Republican leaders exacerbated this crisis, but they didn’t cause it. A radically progressive tax code did. Ever wonder why government has grown larger even during periods when tax rates have gone down? Maybe it’s because the average person has no real idea what government costs. As of today, the top one percent of earners pay nearly 40 percent of all federal income taxes. The richest 10 percent pay more than 70 percent of all federal income taxes. In other words, most people have very little skin in the game.
A system like this is popular with the majority — why wouldn’t it be? — but it is unsustainable. When the bulk of the country has no stake in fiscal restraint, expectations become unmoored from reality and spending explodes.
All of which leads inevitably to our current condition. Here’s one measure: In famously bankrupt Greece, the national debt amounts to about $39,000 per Greek. In the United States, federal debt runs to over $53,000 per American. America is now the most indebted nation in the history of the world, a country about to post its fourth consecutive trillion-dollar budget deficit, a place that owes more to creditors than the sum total of its entire economy. We are going under, for real.
And almost nobody in our political system really cares. Sure, some in Congress make the right noises. But at this point there is no sizable constituency for reducing federal spending. By contrast, entitlements are more popular than ever, and most voters favor sending an ever-larger portion of the bill to a relatively tiny group of people. When Obama says we ought to soak the rich, he is speaking for the majority.
Going over the cliff won’t stop this trend, but it might spur a much-needed conversation about the actual cost of government. Nobody wants to see middle class families pay thousands a year more in taxes. On the other hand, that’s money the government has already spent on programs they likely support. It might be useful for them to know that, and to consider the consequences of it. Until they do, there is no hope for spending reform.
There is no question that going over the fiscal cliff would shock the economy, at least in the short run. The Congressional Budget Office estimates that the combination of spending cuts and tax increases would cause real GDP to contract by a full half-percent in 2013, pushing unemployment back over nine percent.
These are bad numbers, but they’re not catastrophic. And they’re likely to be temporary. The CBO found that going over the cliff would in fact strengthen the economy within a year, bringing unemployment down to 5.5 percent by 2018.
Granted, by Washington standards that’s an eternity, which is to say, more than a presidential election cycle away. Republicans could get hammered in the meantime. They might even lose seats in Congress. But at least they’d have the facts on their side.
That’s worth something. No matter what happens in Congress next month, regardless of what Obama tells audiences as he stumps for his plan around the country, the basic equation won’t change: Entities that spend more than they take in eventually go under. That is true for businesses, and ultimately it is true for governments, too, because math is immutable. It’s a species of physics, baked into the fabric of the universe and impervious to election results.
In the long run, math is worth running on. Republicans don’t have a lot of good choices right now. They might as well try it.