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Fiscal Cliff

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Perry Steele

Perry Steele

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The "fiscal cliff" has all the earmarks of a false flag operation, full of sound and fury, intended to extort concessions from opponents. Neil Irwin of The Washington Post calls it "a self-induced austerity crisis." David Weidner in the Wall Street Journal calls it simply theater, designed to pressure politicians into a budget deal:

The cliff is really just a trumped-up annual budget discussion.... The most likely outcome is a combination of tax increases, spending cuts and kicking the can down the road.

Yet the media coverage has been "panic-inducing, falling somewhere between that given to an approaching hurricane and an alien invasion," according to the Post. In the summer of 2011, this sort of media hype succeeded in causing the Dow Jones Industrial Average to plunge nearly 2000 points. But this time the market is generally ignoring the cliff, either confident a deal will be reached or not care.

The goal of the exercise seems to have been to dismantle Social Security and Medicare, something a radical group of conservatives has worked for decades to achieve. But with the recent Democratic victories, demands for "fiscal responsibility" may just result in higher taxes for the rich, without gutting the entitlements.

The problem is that no deal is going to be satisfactory. If we go over the cliff, taxes will be raised on everyone, and GDP is predicted to drop by 3 percent. If a deal is reached, taxes will be raised on some people, and some services will be cut. But the underlying crises - high unemployment and a languishing economy - will remain. More effective solutions are needed.

 

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