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Thursday, November 15, 2012

Leaping Off the Cliff

President Obama is attempting to use the coming "fiscal cliff," or the enactment of a set of laws designed to drastically reduce deficit spending, as a threat to induce Congress to, you guessed it, spend more money and tax those institutions that drive the economy.

Oddly enough, what Obama's stick in this scenario is the same, from the Republican perspective, as what he's trying to get Republicans to agree to. The two parts of this fiscal cliff are:

1. Increase taxation of higher-end earners in an attempt to increase revenue.

2. Sharply reduce spending with across-the-board spending cuts.

What Obama is asking for is that Republicans agree to enact the first part of the cliff and avoid the second half. Now, I may be just a naive sap, but the second half of the cliff doesn't seem so bad from a conservative perspective. Republicans wouldn't see that as a threat. As a Republican, I'd be telling Obama to go rot in Hell. At least spending will finally be cut.

President Obama, along with most Democrats, doesn't understand much about economics. Raising taxes often reduces revenue, and lowering them raises it. It worked for G.W. Bush, Ronald Reagan, and John F. Kennedy. Anyone who has played Sim City knows how this works. Overtaxing causes businesses to either shut down or relocate. You can't get revenue from businesses that aren't there anymore. Case closed.

Here's a graphic of projected deficit spending, with or without the fiscal cliff legislation being enacted. The flat line in the middle represents spending exactly what we take in.

The gray area represents how far from balancing the budget we will be if we stay on the course we are currently following--massive debt. The blue area represents where we'd be if the fiscal cliff was enacted.

I'd rather see lower deficits, thank you. Of course, we'd get there even faster with a combination of spending, tax and regulation cuts. However, President Obama is unlikely to allow that route due to his rigid ideology.

Ah, screw it. Let's jump off the cliff and see what happens. How could it be worse?

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