More on the Fiscal Cliff

As you may know going off the “Fiscal Cliff” is the hysterical term being used to describe what will happen starting on January 1st, 2013 if our government “leaders” don’t agree to change the tax code and/or cut spending.

Here are my predictions –

1 No agreement will be reached; expect them to defer the impending changes from January 1st by six months, and then another six months. Clearly, Washington doesn’t realize that it doesn’t matter what they do because the next election cycle isn’t for two years.

The public has such a short memory that they will have completely forgotten about the cliff no matter what they do, or don’t do. As the election system has become so corrupted, by the system itself, it is almost impossible to replace an incumbent so they’ll continue to laugh all the way to the bank.

2 The public will be pounded, by both the president and the (sometimes) loyal opposition, that the end of the world will occur on January 2nd, unless the public pressures its congressmen and women, or president to comply with the other side’s position. Not a chance. No matter what the public thinks or does it won’t make any difference.

3 The end of the world will arrive, promptly on January 1st. Pure nonsense. The public will moan about the tax increases and the loss of freebies but adapt; the Department of Defense will moan that they can’t buy the latest toys, but adapt. All sides will adapt; it’s called life.

Reasonably, only a small tax increase will occur, either by raising tax rates or reducing deductions. The sequestration, or spending reductions, will be pitched as a 5-10 year process or $x billion or trillion over 10 years for example. You won’t be told that the real cuts won’t occur until the last year of the proposal, 4 or 9 years with only minor immediate reductions. It will be hailed as a great example of cooperation… as long as you don’t actually read the agreement. Few will.

I actually think that our government spending will increase year over year, but the rate of increase will decrease slightly. It will be hailed as a great success, and the complicit, cowering media will accept it.

The real game is that any substantial cuts will only happen when the current crop of politicians have retired so they will leave the mess to the ~~chumps~~ ~~fall-guys~~ future politicians who’ll be stuck with the larger mess. They will pass it on again, until we have the “great collapse.” The political retirees will be living large in Mexico or someplace warm and will be enjoying themselves. Thanks to you.

But it really doesn’t matter what happens in the next month, as the next election cycle isn’t for two years.

4 The world won’t come to an end starting on January 1st. If nothing of substance happens, both sides will claim that they saved the planet, and if there is a disaster ( see 3 above), both sides will blame the other. In other words, business as usual while the public suffers. In any instance, it won’t matter what our elected politicians do, as the next election cycle isn’t for two years.

We’ll just lurch to the next disaster, and this one will be long forgotten and our elected officials will laugh… all the way to the bank.

The only risk, as I see it, is to the House Speaker, John Boehner. As he is negotiating with President Obama who will not run for reelection, Obama has the upper hand. Boehner doesn’t as he will be running again to keep his face in the public feeding trough, and to maintain his Speaker role. Boehner must be perceived as the winner by his own party. Any failure to score a win will be a threat to his leadership. So look for his demise if the “compromise” isn’t achieved in the Republican’s favor. He knows it, the president knows it and so do the Republicans in the wings waiting to kick him to the curb and get his job.

Finally, take a look at this image showing debt ratios. You’ll see that we’re spending as if we are still a wealthy country with unlimited reserves. If we are so wealthy, why do we have so much (and rapidly increasing) debt, and borrow 40 cents of every dollar that our government spends?

If you look carefully at the countries in red, you’ll see the United States, Greece, Iceland,, Portugal, Ireland, Japan and Italy all deep in debt. Only two, us and Japan haven’t descended into fiscal hell… yet.