On New Year’s Day, the Bush-era tax cuts will expire and mandatory cuts in government spending will go into effect, a double-whammy to the economy that is being called “the fiscal cliff.” Republicans do not want the tax increases and Democrats do not want the spending cuts. So Congress is negotiating with the President about compromises, reforms, and trade-offs, all in an effort to avoid what nobody wants, the country going off the cliff.
But might falling off the fiscal cliff, in the long run, be the best solution, despite the horrible short-term consequences? Under that scenario, taxes would rise dramatically (giving the government more revenue, the Democrats’ dream) but also government expenditures would be cut dramatically (resulting in a smaller government, the Republicans’ dream). The combination of higher revenues plus lower expenditures would solve the deficit.
Isn’t this a true bi-partisan solution? Don’t we as a nation need to take our bitter medicine before we can get better? Other countries, such as Great Britain, have gone through austerity programs as a necessary step to fiscal health. Could we Americans handle austerity?
(I am not necessarily advocating this, simply proposing for now a mental experiment. Some of you suggested this in yesterday’s discussion of “Breaking Pledges,” but it’s worth discussing in its own right.)