Yes, the "fiscal cliff" is a metaphor, but metaphors, to one extent or another, represent somebody's impression of reality. The somebodies in question, this time around, are the Fed and the Congressional Budget Office, so their metaphor deserves a hard look. The CBO estimates that "going over the cliff" will result in close to a 2 per cent drop in GDP — and hence a pretty substantial drop back into recession, sending unemployment back up to 9 per cent, and putting most of the long term unemployed kind of permanently out-of-luck.
Boehner is scared. Obama is scared. Sadly, a great many of those assholes elected to the House by undereducated rednecks are not scared at all, so it behooves us to take a look over the cliff and see what might be at the bottom.
Three factors come together at the end of the year: the end of the "Bush" tax cuts, the end of the Obama payroll tax cuts, and the dreaded "sequestration," which would cut large chunks out of the military budget and the non-"entitlement" civilian budget. Let's have a look.
The payroll tax cuts are pure stimulus, intended to promote consumer spending, and generally expected to lapse this time around. They are most beneficial to the working class, which is good enough reason to expect they will be the first tax cuts to go. (Nobody seems to be talking about eliminating the cap on FICA, which would make Social Security viable for at least another generation, and probably forever.)
Sequestration takes a cleaver to places where scissors and scalpels are more appropriate, although both military and non-military budgets could stand a good look. Anyway, it won't happen. The whole idea of sequestration was to make things too uncomfortable for both Democrats and Republicans to let it happen. They won't.
On to the Bush tax cuts: current talk involves increasing revenues rather than rates. The Democrats still are making noises about raising taxes on the rich, which seems to be perfectly acceptable to the majority of Americans, who are not rich. Personally, I like Romney's idea of putting a limit on deductions and credits, and I think his $17,000 suggestion might be in the right neighborhood.
Too big a MacMansion? Tough. If you live in a smaller house, you can deduct all the mortgage interest. Too many kids? Tough. Try a little birth control — and, if contraception violates your religious beliefs, there's always abstinence. Granted, limited charitable deductions may be a little tough on certain ballet companies and museums, but it wouldn't inhibit my regular contributions to Doctors Without Borders (deductible), ACLU (non-deductible), public TV and radio (deductible), or the Committee in Solidarity with the People of El Salvador (definitely not deductible.)
It is starting to sound like Obama might resist wimping out this time around — which is to say, he might be willing to let all the Bush tax cuts expire if the Tea Party assholes push him against the wall. Let's hope his balls have re-descended now that he doesn't have to worry about re-election.
(Let's also hope that Timmy Geithner's replacement never met Robert Rubin.)