...there’s something to be said for deficit reduction by inaction, however ham-fisted or ill-timed it may be in any particular case. In fact, to break the democratically generated debt spiral, we may need to institutionalize a fiscal cliff on a permanent basis. Imagine the following rule: if the projected federal debt for any given year exceeds (say) 1.5 percent of GDP, there will be an automatic tax increase sufficient to cover the excess debt, unless two-thirds of each legislative branch say otherwise and the President consents.
Draconian? Sure. The sort of prescription Grover Norquist or GOP leaders would urge? Of course not. But there has to be some way of confronting voters with the costs of the transfer state they appear to cherish. Spending restrictions will never curb the impulse to consume future generations’ production now. You have to re-align taxing and spending decisions—in other words, send current voters and taxpayers the full bill for current consumption.
Is that going to happen? Probably not. That’s all the more reason to view the coming cliff with mixed feelings and, perhaps, as a net plus.
The coming fiscal cliff, which got Bill Clinton into trouble with his own party earlier this week, is probably a good thing, because it will finally force us to be serious about reigning in the debt. Maybe using the threat of automatic tax increases, a particular anathema to conservatives and something Democrats would publically balk against for the middle class, would actually cause everyone to start to take this a little more seriously. And it has to be remembered that even Ronald Reagan's compromise with Democrats in 1982 over the budget (the compromise was a 3-1 ratio between cuts and spending) did ultimately become a simple 1-1 ratio of cutting to spending, which, unfortunately, was not what was promised.
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