Posted on 11/19/2012 6:42:05 AM PST by SeekAndFind
Supply-siders and Keynesians don’t agree on much these days, but when it comes to the alleged “fiscal cliff”, both sides are in agreement that jumping off this ledge would bring tragic economic consequences. Though a strong believer in supply-side principles, I believe even more strongly that conventional wisdom is nearly always wrong. It’s wrong here.
Before getting into why the grand assumptions surrounding the fiscal cliff are ridiculous, it’s best to explain why we’ll never reach this ranch-style house “plunge” onto soft ground. We won’t because the incentives that drive politicians ensure a deal.
That’s the case because 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 with an eye on re-election they’re not going to vote for large tax increases. At best with taxes, they’ll compromise: lower rates in return for a reduction in economy-distorting tax loopholes.
Considering spending, though it nearly always occurs at the expense of growth, politicians exist to spend our money. That’s what animates them, and it’s true irrespective of party affiliation. The spending of the money of others is to politicians what oxygen is to the rest of us. Because spending is breath to the political class, there’s no way they’d ever allow automatic spending cuts or, “sequestration.” Repeat after me, we’ll never jump off of the “fiscal cliff”, and breathy commentary suggesting we will is written by writers who haven’t a clue about human nature.
Turning to why supply-siders and Keynesians alike are so fearful of the “cliff”, that’s easy too. For Keynesians, they’re deluded by the false belief that government spending is an economic stimulant.
(Excerpt) Read more at forbes.com ...
If conventional wisdom is always wrong, how does it become conventional? Is non-conventional wisdom always right?
There was an election and that bastard was re-elected. We lost two seats in the Senate and several more in the House.
The GOP in Congress should simply release a statement to the effect that they will not oppose ANYTHING Obama proposes economically. They will not however support it. They will abstain and the ENTIRETY of the consequences will fall on the Democrats.It will be Obama’s program and his alone.
THAT will lead to TOTAL economic collapse and then maybe the American public will realize what damn fools they are.
Its reached that point.
Elections have consequences and the electorate needs to face them.
What kind of “limit” is it if it can always be raised?
Yep.
Money is no longer tied to gold or silver, and hence has no intrinsic value.
No matter how bad we eff things up, the Euros will always be ten times worse.
A number of despotic regimes in this world (Russia, House of Saud, the ChiComs) can continue to prop themselves up only by continuing to sell to the West.
Hence everyone will pretend there is no problem and the game will continue on and on and on and......
Whereas the economic analysis in this article is correct, I have to disagree with his political assessment.
The politicians set this whole thing up such that there is no way to assign blame on anybody. The tax increases were passed two Congresses ago.
While disclaiming “conventional wisdom” this is CW at its worst.....
Watch.....O will facilitate the cliff...then fasten your seatbelt.....
Author thinks the Dems & their Dear Leader won’t vote for tax increases? That what the campaigned and won on! “TAX those filthy rich bastards!”
BTW.....this author is predicting the future. How good at that have conservatives been in the last year????????
“There is no actual solution to the fiscal cliff....”
“e have lied for more than a decade about economic progress — there has been none. It has all been borrowed and bought forward, and the ability to do that has now ended.”
http://market-ticker.org/akcs-www?post=214077
Forbes is part of the problem....
If they think we are stupid enough to fall for “lower rates”, then just wait until “we” see our tax bills in 2013 and 2014. And yeah the withholding for 2014 taxes will jump before the 2014 elections
and philosophically, why should this economy “favor” real estate (no jobs or taxable wealth created there, right? all those generations before us were just WRONG about that)
or private health savings or retirement savings or private support to charity or risking and investing something instead of spending it all like no tomorrow?
Let the govt handle all that
sarc
I AGREE!!!!!
The only limit I can really think of is where America becomes lower than much of the third world due to our creditors being unwilling to offer up much more in loans. At that point, currency will inflate, the government will complain but continue trading, because there simply is demand by the American populace to buy the cheap, foreign products. Frankly, the days of the West ruling are coming to a close.
Once the rest of the world flees our debt auctions entirely, it will be mandated that your private 401k or pension invest, say 25% of its value, in government bonds. It will be sold as making sure the portfolio includes a portion of “safe” (no interest) US government bonds. Justice Roberts has already established that the federalism can compel your purchase of a service.
Under your scenario Europe will reach this crisis point many years before we do. And the ChiComs and Saudis will have their “oh, shiite” moment when they realize the music has stopped and they don’t have a chair.
Some excuse to float more credit and keep the music playing will ALWAYS be found.
One of the consequences of the election is continuing Republican control of the House. We didn’t elect them to abstain and let the Dems roll over us, we elected them to obstruct Obama’s agenda.
As bad as the deals they’re going to make are, just giving up would be even worse. Voters don’t take kindly to temper tantrums. Especially tantrums that result in large tax increases.
Democrats face a strange dilemma.
The commies at the top actually WANT a fiscal/economic collapse (so they can remake the country),
but they DON’T WANT to accept the responsibility for it.
That will delay bankruptcy by a year or two, while destroying the 401k system and causing a backlash at the polls.
It's easier to continue monetizing debt, and lazy, timid politicians always choose the easy way out.
Deal = RINOS caving again
There will be a deal. No doubt. It won’t come close to fixing the problem, of course. Neither side is serious about fixing the problem.
Nobody will be left ahead. (except for our rulers)
When a politician opens his/her mouth, only three scenarios are espoused
1. lying to be elected
2. lying to be re-elected
3. pandering to the party bosses for choice committee assignments.
All other blathering can be ignored.
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