Diving off the fiscal cliff? Bring it on.

OK, for all of you not keeping score at home, here's what happens at the stroke of midnight December 31 if Congress doesn't act: Medicare reimbursements to doctors will be slashed, the beloved payroll tax cut will expire, extended unemployment benefits will be axed, millions more households will be subject to the dreaded Alternative Minimum Tax, and $100 billion worth of spending cuts to defense and domestic programs will go into effect. Oh, and everyone's federal income taxes go up by a lot.

Economists say nearly $600 billion will be sucked out of the economy unless something is done. A growing number of people -- let's call them "cliff divers" -- say "bring it on!"

With unemployment still hovering right around 8 percent, and economic growth anemic, this sounds kind of crazy. But then, so is a political culture that can't seem to come to even the smallest agreement over how America should reduce its trillion-dollar deficit. The sensible way to handle things is to extend the tax cuts and keep government spending where it is while the economy is still weak, then work on a set of long-term changes that will bring the budget into balance: some tax hikes, some changes to entitlement programs, probably some defense cuts. But if our lawmakers are incapable of doing the sensible thing -- and so far they have been -- then a collective dive over the cliff may be the next best choice.

I know what you're saying, but it won't necessarily be a free fall. Lawmakers will have a little while before the tax hikes really begin to bite. Long enough, hopefully, to see the damage they've done, and come to their senses. If nothing else, it might allow Republican lawmakers who've signed the "no new tax" pledge to agree to new revenue without technically violating their pledge. After all, once all the tax cuts expire, a vote to restore some of them isn't a tax bump; it's a tax cut.

Granted this is no one's idea of the best way to get budget reform. But if it's the only way to get budget reform, we may need to all hold hands, and jump.

About the author

Megan McArdle is a special correspondent for The Daily Beast and a former senior editor for The Atlantic. She writes about business and economics.
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I'd gladly pay another $2000 for a couple of years to shake up the power structure in Congress! They exemplify Will Rogers quote "America has the best government money can buy!" The rich have been given enough welfare for the last dozen years. Most of the so-called "job creators" who will pay higher taxes are leeches working on "Wall Street." The Pentagon spends money forced on them by Congress which does what the lobbyists from the "military-industrial complex" tells them to do. Kill the F-35 now, along with the other useless big-buck military weapons programs that don't work.
Remember "zero-based budgeting?"

In 2013, if Congress does nothing the tax cuts enacted during the Bush administration will expire, and tax rates will return to what they were during the Clinton administration. Also, under the Budget Control Act of 2011 (P.L. 112-25), spending would need to be reduced by $1.2 trillion over the 9 fiscal years from FY 2013 to FY 2021. Since it is assumed that the spending reductions would reduce interest on the debt by $216 billion, program spending only needs to be reduced by $984 billion. ($1.2 trillion - $216 billion = $984 billion.) Since the $984 billion reduction in program spending is over 9 years, the spending cut in each fiscal year is $109 billion. ($984 billion / 9 = $109 billion.)

The U.S. debt is approximately $16 trillion. For the past four years, the deficit has been over $1 trillion per year. It was about $1.1 trillion in fiscal year 2012, which ended on September 30, 2012. ($3.7 trillion in spending - $2.6 trillion in taxes = $1.1 trillion.)

So, the so-called “fiscal cliff” means that in 2013, instead of spending $3.7 trillion, the federal government would spend about $3.6 trillion; and tax rates will return to what they were when Clinton was president. Our debt would continue to rise, but it might rise a little more slowly.

I don't think this change is fiscal policy is a "cliff."

Unfortunately, going over the fiscal cliff may be the only way to get anything done. Waking up in January to a real crisis will force serious proposals on middle class tax cuts and spending reform. Any interim deal that kicks the can down the road even 1-3 months just prolongs the farce.

I Congress were a true company, most would have been fired by now for not solving this problem and putting it off as long as they have. John Maudin has wriiten a book called "End Game". In it, there is description for the US to use a "Glide path" to solve our fiscal problems. Some pain for all of us, but a good outcome in thelong run.

Yes bring it on! Not that I want to pay more in taxes or for the economy to suffer but rather I'd like to see our Federal government actually cut spending. It is such an unnatural thing for government to do I'd like proof that it can be done. In fact maybe a chain reaction can be started where each party one-ups the other with coming up with ideas on how to cut costs. But I know that's a rediculous thought, no one in government actually has the courage to cut spending. We may look back at "sequester" as one of the most ingenious moves ever made - automatic spending cuts without any one party taking more blame than the other.

And when the lenders walk, the economy and everyone in the US will be in real free fall. We're talking currency devaluation and much, much more. That's when those with the means to do so start to jump off the ship.

Please explain to all listeners that the "spending cuts" proposed by both sides are from projected future increases!
The Income tax was created in 1913 and rates have ranged up to 90% yet total taxed collected have been about 18-21%
of GDP REGRDLESS of the rate. We can't spend a Trillion more over revenue every year much longer. Lenders will walk.

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