I’ve been thinking about this fiscal cliff all the pundits are warning us against. Since the election of Ronald Reagan the country has made two profoundly damaging mistakes. It has continually raised the Defense Budget, thereby robbing our education system and basic infrastructure (roads, bridges, broadband, etc) of the needed funding and dragging us down to second world status in those areas. The second mistake was to cut taxes on the top five percent. As Nick Hanauer’s astonishing Ted Talk (which was censored by TED until the outrage grew too loud) shows, this move to cut taxes on the 1% by both Reagan and Bush II was destructive beyond belief to our country.
So now if Congress DOES NOTHING in the next six months, both those disastrous mistakes will be fixed in ONE DAY, January 1, 2013. On that day the Bush Tax Cuts will disappear for good, and the Sequester (along with previously agreed upon cuts) will take at least $1 trillion out of the Defense Budget in the next ten years.
Why are Progressives and Libertarians not cheering for this to happen? It would quickly solve the deficit problem as Ezra Klein points out in this chart. Letting the Tax cuts expire and the Sequester go through is called the Extended Baseline Scenario in this Chart.
The Chart on the lower right, is what Mitt Romney and the Republican’s want. Now I am aware that the Keynesian effect of taking a lot of government spending (on planes and missiles) out of the economy might cause a recession and that’s probably why Bill Clinton said the stupid thing about the tax cuts this week. Quite honestly, a couple of quarters of flat growth to address the two biggest mistakes of the Conservative era and put our fiscal house in order, would be worth it.