Is that a fiscal cliff ahead in the distance?

[Jacob]

So what do you all think about the oncoming fiscal cliff?

What do you think of the Democrat position? The Republican one?

What sort of drama can we expect, and what's the ultimate outcome?

[MadImmortalMan]

I expect a non-solution to be passed on the last possible day that pushes the cliff out for a little while longer.

[Admiral Yi]

I understand the media's need, particularly in the case of 24 hour news channels, to over-dramatize stories, but I am really losing a lot of respect for CNN, the Wolfman in particular, over how they're handling this story.

Wolf is treating Teh Fiscal Cliff as if it were equivalent to the debt ceiling talks.  Failure to increase the debt limit could very well have been calamitious.  (I qualify this statement because I think it's debateable whether Uncle Sam stiffing employees, contractors, and whoever, while continuing to pay interest and principal on the debt, would in fact have destroyed the US' bond rating and blown up international markets.)

This is nothing like that.  Taxes would go up, spending would go down, people would feel some pain, the economy would take a hit, and our truly horrendous deficit would decrease.

I think there's also an object lesson here about budgetary deals in general.  Part of Teh Fiscal Cliff is the "sequester" that was agreed to as part of the original debt ceiling drama.  That appears to be back on the table.  Spending cuts are like UN Security Council Resolutions: they are very susceptible to softening, hard to maintain in their original form, and impossible to toughen.

As to what kind of deal will come out of the talks, the GOP is signaling a willingness to trade reductions in exemptions for holding the line on rates.  In return I think they will get nebulous promises to reform entitlements.  Which will be subject to renegotiation, softening, and demagoguery when it's time for them to come into effect.

[MadImmortalMan]

The people most worried about the cliff are the market and the Fed. The term was invented by Bernanke. The CEO of Goldman, a guy known for reclusiveness in the media, is all over the place talking about the damage it will do.

Lots of companies are doing "special dividends" this year so they can get their shareholders the cash at the lower tax rate. Last one was Costco at a $7.00/share payout. Seven bucks a share.

[DGuller]

Yeah, the "cliff" is a misnomer.  The effects of the fiscal cliff are gradual, not sudden.  Then again, maybe this hyperbolic framing is a good thing when it comes to forcing politicians to reach an agreement.

[Admiral Yi]

Then again, maybe this hyperbolic framing is a good thing when it comes to forcing politicians to reach an agreement.

Why? You seem to be buying into the premise of the hype.

[DGuller]

Then again, maybe this hyperbolic framing is a good thing when it comes to forcing politicians to reach an agreement.

Why? You seem to be buying into the premise of the hype.

What premise?  That the fiscal cliff will be bad?  Yes, I'm buying into it.  What I'm disagreeing with is the suddenness of the disaster as implied by the word "cliff".

[Admiral Yi]

What premise?  That the fiscal cliff will be bad?  Yes, I'm buying into it.  What I'm disagreeing with is the suddenness of the disaster as implied by the word "cliff".

Tell me if I have this right.  You're worried that an increase in taxes and a cut in spending will push the economy into recession.  So you're hoping that to avert this disaster politicians agree to a compromise that increases taxes and cuts spending.

[DGuller]

What premise?  That the fiscal cliff will be bad?  Yes, I'm buying into it.  What I'm disagreeing with is the suddenness of the disaster as implied by the word "cliff".

Tell me if I have this right.  You're worried that an increase in taxes and a cut in spending will push the economy into recession.  So you're hoping that to avert this disaster politicians agree to a compromise that increases taxes and cuts spending.

  Don't you have Raz to argue with? 

[citizen k]

  Don't you have Raz to argue with? 

As a casual observer, I must say you're a good stand-in. 

[DGuller]

  Don't you have Raz to argue with? 

As a casual observer, I must say you're a good stand-in. 

[Kleves]

I think we need a reasonable deal that cuts spending while raising taxes. I think the Republicans can be made to take a reasonable deal. I think so far Obama and the Democrats have not signalled that they are willing to negotiate a reasonable deal rather than trying to leverage the media into shoving an unreasonable deal down Republican throats.

[Admiral Yi]

There are three logical arguments that I can think of to avert the fiscal cliff.

One, fatcats and billionaires are not paying their share.  We want the rich to pay more, even if the risk is recession.

Two, it allows Obama to keep his campaign promise to not raise taxes on the Schumer class.  This one works well for a partisan Democrat.

Three, we need to reduce the deficit, but not as abruptly and to the magnitude that the fiscal cliff entails.  So some tax increases and spending cuts would be nice, just not so much.

[DGuller]

I think there is a practical difference between where the tax hikes are coming from.  IMO, raising taxes on the riches isn't going to hurt the economy a bit, since they only spend a fraction of their income anyway.  Raising taxes on the middle class would be much more damaging.

[Razgovory]

Hey Yi, are you part of the "Schumer Class"?