Peter Bromberg's UnBlog

When it comes to the alleged “fiscal cliff”, both supply-siders and Keynesians are in agreement that jumping off would bring tragic economic consequences. However, conventional wisdom is nearly always wrong, and I believe it’s wrong here. We won’t reach the fiscal cliff because the incentives that drive politicians ensure a deal. With the economy still limping, very few politicians will want to be on record as having voted to raise rates of taxation. Every member of the House of Representatives is up for re-election in 2014, a third of all senators are, and they’re not going to vote for large tax increases. Considering spending, though it nearly always occurs at the expense of growth, politicians exist to spend our money. We’ll never jump off the "fiscal cliff". For Keynesians like Obama and his advisers, they’re deluded by the false belief that government spending is an economic stimulant. So automatic reductions in spending by the feds would directly subtract...

“Fiscal cliff” is the popular term used to describe the conundrum that the U.S. government will face at the end of 2012, when the terms of the Budget Control Act of 2011 are scheduled to go into effect. Among the laws set to change at midnight on December 31, 2012, are the end of last year’s temporary payroll tax cuts (resulting in a 2% tax increase for workers), the end of certain tax breaks for businesses, shifts in the alternative minimum tax that will take a larger bite, the end of the Bush tax cuts from 2001-2003, and the beginning of dozens of new taxes related to Obamacare. These tax changes affect everyone -– not just “the rich”. At the same time, the spending cuts agreed upon as part of the debt ceiling deal of 2011 will begin to go into effect. According to Barron’s, over 1,000 government programs – including the defense budget and Medicare are in line for “deep, automatic cuts.” This bill was signed into law by Barack Obama on August 2, 2011 . Republicans should allow th...