Fiscal Cliff

            It is December, 2012, some days away from the “fiscal cliff”.  In the future what will have happened will be in retrospect obvious and the only thing that could have happened.  For the moment, however, as usual the random guesses that will later turn out to be The Truth are unsorted from the other nonsense.

            In the summer of 2011 in that week’s crisis over the national debt ceiling discussed elsewhere http://contrariat.blogspot.com/2011/08/downgraded.html  the Congress agreed to lift the debt ceiling for 18 months in exchange for a package of automatic tax increases and spending cuts effective January 1, 2013.  The theory was that with the spending cuts unpalatable to the Democrats and the tax increases unpalatable to the Republicans the Congress would have 8 weeks between the 2012 election and January 1 to reach some accommodation to avoid the “fiscal cliff”.  The can was kicked down the road.

            Now, in 2012 the Congress, ever mindful of earning its historically low approval ratings has failed to act.  The blame will fall depending on political tastes, but I believe it belongs mostly to the Republicans.

            Contraria has reason to be hopeful.  The scenario as presented in December requires that the Congress enact tax increases and spending cuts to avoid the automatic tax increases and spending cuts triggered in 2013.  They just can’t do that.  However, in January 2013 with the higher tax rates and lowered spending in place the Congress could come to our rescue.  I can imagine first hearing that the sequestered defense funds threaten national security, so the Republicans vote for the spending, which the Democrats will tie to other spending.  Then we may hear that the automatic tax increases are hurting the masses, so they are mostly repealed.

            I’ll take my chances that the only things Congress can do are to increase spending and decrease taxes.  By going over the “fiscal cliff” with tax increases and spending decreases we have, albeit inadvertently given the Congress the opportunity to do what it is good at.  Maybe it will all work out.