What’s a Fiscal Cliff?

So I’m trying to catch up on this whole “fiscal cliff” thing. What is it? Well, according to Wikipedia, the only information source that it’s completely safe to link to, the fiscal cliff is a combination of events that are scheduled to take place on Jan 1 2013, if no one intervenes. One is the end of Bush tax cuts. Another is a broad set of spending cuts. A third is something about new taxes related to Obamacare.

Why is it a cliff? Well, it’s not, but the Congressional Budget Office (CBO) wrote a report warning that those things may cause a recession in 2013. Their actual wording is:

Under those fiscal conditions, which will occur under current law, growth in real (inflation-adjusted) GDP in calendar year 2013 will be just 0.5 percent, CBO expects—with the economy projected to contract at an annual rate of 1.3 percent in the first half of the year and expand at an annual rate of 2.3 percent in the second half. Given the pattern of past recessions as identified by the National Bureau of Economic Research, such a contraction in output in the first half of 2013 would probably be judged to be a recession.

(I note that the recession might turn into a—uh—procession?—in the second half of 2013.)

Two years ago, we had basically the same problem. Back then, Congress couldn’t agree on anything, except to move the deadline two years. Today, they still can’t agree on anything, except that something must be done, and it must be ideologically consistent with their own party and not the other.

Republicans want to extend the Bush tax cuts because rich people rock. Democrats want them to end because rich people suck. (That is a gross oversimplification of a situation that I don’t really care about.)

Nobody wants broad spending cuts, because it will almost certainly affect things they don’t want to affect. Both sides want targeted cuts in specific areas. Good luck with that in the current political climate.

Obviously, Republicans don’t want Obamacare taxes. Digging a little deeper, it seems that these taxes are going to be on people making $200,000 or more, the category that one side calls “a rich person” and the other side calls “a small business.” I call it “not me.”