Like most problems, the so-called fiscal cliff started as a solution to another problem: runaway deficit spending. Said runaway deficit spending was supposed to “stimulate” demand and pull us out of the Great Recession, caused in no small part by the deflated housing bubble. The housing bubble was supposed to solve the non-problem of biased (i.e., “responsible”) lending practices.
’Round we go, healing ourselves into an ever higher perch on the infinite cliff. What should we expect when proposed solutions don’t go after the heart of the problem? Federal spending has more than doubled since the ’90s, but revenues have risen only about a third. Trillion-dollar deficits are not a result of undertaxing, but overspending. Seventy percent of the federal budget is comprised of assistance payments to individuals. The problem then is not just overspending, but overspending on welfare.
In 2011, when the Tea Party Caucus in Congress rankled at raising the debt limit, Speaker Boehner cut a deal with President Obama to put off the day of reckoning: the fiscal cliff, comprising future tax hikes and future defense cuts, whilst slowing the pace of government growth ever so slightly.
That reckoning is now—or it should be—and our wise leaders are talking about how terrible the deal they struck 17 months ago is. To prevent tax hikes, Boehner has proposed…tax hikes, but not enough for the spendthrift president. “I get that for free,” he said, in Chicago brawler mode. Tax hikes on the wealthy, even if they resulted in a net gain in revenue, will barely dent the deficit, and will certainly hurt job creation.
Continued class struggle is Obama’s preferred solution, and he’s sure to get it with tax hikes for the top 2 percent. If Boehner takes the deal, Obama can take credit for averting tax hikes for the 98 percent, while said 98 percent are made worse off by a besieged upper class that hides its money in mattresses instead of making human and capital investments. If Boehner deep 6es the deal, Obama will happily take the money from all the tax hikes coming on January 1 and blame Boehner for his recklessness.
Either way, we can look forward to doing it all over again this time next year.