Why drive toward the cliff in the first place?
The big concern among wonks in Washington these days is that Congress is going to drive us off the “fiscal cliff” — they’ll fail to extend current policies, trigger a combination of tax hikes and spending cuts, and wreck the economic recovery:
What impact might that have on the economy? Their best guess is that it means declining real GDP in the first half of next year to the tune of 1.3% (annualized; or around $100 billion through the first half), followed by growth of 2.3% in the second half of 2013, or 0.5% for the full year. Unemployment would reverse course and start rising it that fiscal scenario remained in place…
This sort of policy is absolute insanity, and some of the best proof yet that Congress is broken. Think about it this for a moment — as current policy stands, we will knowingly dip back into a recession in a matter of months. Everyone knows it, and it’s perfectly possible that nothing will be done about it. What I want to know is, given that everyone in Congress knows that Congress is dysfunctional, why in the world would we pass a set of policies that will just dump us right back into a recession?
The technical reason we’re scheduled for a double-dip recession is that a huge chunk of current policy is scheduled to expire at the end of the year. These are policies that keep being extended temporarily, without any change to the permanent laws on the books, which are constantly threatening to kick back in. We essentially have two sets of government policies — the permanent ones, which we don’t want, and the temporary ones, which Congress refuses to make permanent. What kind of a way is that to run a government?



