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The fiscal cliff explained (with help from Hollywood)
Anyone not seen the movie "Thelma & Louise?"
Spoiler alert! There’s a key scene in the movie where the gals are driving dangerously fast towards the edge of a cliff.
So let me tell you about these two ladies. Thelma is a relatively wealthy woman who was a grateful beneficiary of the Bush tax cuts. Louise is a government servant -- she works in the Defense department.
The car is the economy -- and like all cars, it needs to be maintained. It needs its oil changed once in a while, and it needs the brakes done.
Come December 31, a couple of things have been baked into the economic calendar. Right now, unless Congress pulls the cake out of the oven beofre year's end, the Bush tax cuts will expire, and a whole bunch of government jobs -- particularly in the Defense department -- will be cut.
When those tax cuts expire, Thelma’s taxes are going to go up. She’s going to have a lot less money to spend. When those spending cuts hit, Louise is going to lose her job. So she’s also going to have a lot less money to spend. And our economy depends on people spending in order to grow.
It’s a bit like Thelma and Louise running out of the money they need to change the oil and fix the brakes on their Mustang. The fear is those cuts will reduce consumer spending so much that instead of going up the slight incline we’re on right now, the economy will go right over a cliff. No matter how hard we stamp on the brakes.
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So we have spent or squandered trillions on trying to avoid a depression... That money is sunk, by playing fiscal cliff games, the ROI on that spending is being degraded. It's a negotiation, we will end up somewhere in the middle so get on with it and quit destroying value for the sunk cost. All the fiscal über conservatives need to realize they being extremely fiscally irresponsible. How long until the lost value for sunk dollars exceeds the potential savings?
The Thelma and Louise metaphor is being used a lot, but the true film you should be looking at stars Wile E. Coyote.
Remember how he occasionally runs right off the edge of the cliff, and stands there in mid-air scratching his head, until he looks down, scrambles madly to run back and almost makes it before beginning to fall?
This is where we are now. We have already gone over the cliff. The hiring that is not happening right now, businesses sitting on cash, banks not lending, business not borrowing, investors trying to take their capital gains before changes take effect, houses unsold while buyers wonder about the future of deductions, these are all effects of not knowing what the deal will be or when it will be struck. Obama and Boehner are scrambling madly to get back onto solid ground.
Don't look down. We are already falling.
Anyone want to buy a slightly used Acme Human Cannonball Set?
Since the $14 trillion national debt can easily be paid off by recovering trillions in corporate fraud across all business sectors...defense, finance, education, and health care.....and at the same time introduce an economic stimulus that hires millions of unemployed workers to be the auditing and investigations and the unemployed lawyers to prosecute and bring back the fraud to individuals and municipal coffers, one wonders why these pols wouldn't simply make fraud recovery the next growth industry? Just think, US citizens and the world would be able to have some confidence in the US system if actual Rule of Law was reinstated, unemployment would go down appreciably, corporations would be downsized, and labor and the working class would recover money lost to fraud and lost wages.
That seems to be a win-win for the American people and democracy......I wonder why pols wouldn't even mention this? Public media either?
Paddy you're missing the key point of this dicussion. If we keep spending more than we tax , the car you're drawn just goes higher and higher up the slope so that the eventual plung is that much worse. The real danger is the debt, not tax increase or spending cuts. Those are both things that people have argued we need to reduce our deficit and debt. I'd argue that we're taxed enogh already, and what we really need to focus on is cutting spending. And yes it will hurt, but not as much if we don't stop. Saying we shouldn't cut back on spending because it will be bad is like saying you shouldn't stop drinking on saturday nite because you will be certain to get a hangover, best to just keep the alcohol flowing because our system has become dependant on it.
I'd argue that the wealthy are not currently taxed enough and are not paying their fair share. In the past when we had such a debt situation, the wealthy were taxed as high as 90% to bring things under control. Of course that rate was brought back down once things were under control, but now we're back to being out of control, so we have to bring the rate on the wealthy back up - they're the only segment of society that can afford it - despite their cries to the contrary. So it's not like there isn't a precentent for the situation we're in.
Paddy. OK. You showed us what the fiscal cliff is all about. Bad! Bad! Stay away from that.
But what you didn’t show us is what SHOULD happen instead. Keep the road going up hill. Show us all the great things that will happen in that case – 7 billion people owning castles and yachts and private jets and getting all their income from "unearned" investments without having to work anymore. How about drawing that?
Of course! I’m just kidding. BUT, 53% of the people in this country actually believe that. So, how about getting the politicians who pander to that 53% to tell you how to draw their picture - with achievable facts, of course - that you can describe to all of us.
I, for one, like Paddy Hirsch's Whiteboard explanations. There must be one heck of a pile of markers off on stage right.
Keep up the good work, Paddy. I learn a lot.
(Does this attaboy mean that I am now going to be even more inundated with solicitations from NPR come fund raising time?)
I think most Americans would agree with you that there is far too much fraud in the system. Most Americans, that is, except those who are on the take. So based on your comments, perhaps you are unaware of just how hard the Obama Administration has come down on fraud. In fact, so hard that the Whistle Blowing Lawyers Association is contributing heavily to the Obama campaign. There have been an unprecedented number of whistle blowers coming forward in this Administration, so much so that Whistle Blower payments are over $1.6 billion. The financial industry is one such that has been targeted and, of course, Mr. Romney says that he will repeal the Dodd-Frank Act under which some of the fraudsters have been brought to justice.
Medicare fraud prosecutions are also way, way up as a result of the crack-downs. But perhaps you are unaware of how this quiet, but effective, change in policy has been at work in the background. I refer you to an article that appears Oct 1, 2012 by Eric Lipton in the New York Times entitled "Whistle-Blower Lawyers Throw Support Behind Obama," where you will learn that since January '09 the Federal Government has collected $13.2 billion under the False-Claims Act. The False Claims Act is the primary whistle blower legal tool. Some $9.4 billion of the $13.2 billion is owing to alleged health care fraud cases. BTW whistle blowers only get paid if the claims are substantiated and the fines are at least $1 million. Nevertheless, the phones are ringing off the hooks at many agencies charged with fraud investigation.
I will try to put a link in to the NYT article, but I do not know if it will go through the NPR Marketplace filters or not.
http://www.nytimes.com/2012/10/02/us/politics/whistle-blower-lawyers-don...
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