Advertisement

Cliff Uncertainty Causing Economic Harm

By Kevin Glass, Townhall - December 27, 2012

INSIDE JANUARY

Ben Bernanke said that policy uncertainty, both about the fiscal cliff and the debt ceiling, are already affecting private spending and investment.

Speaker John Boehner's "Plan B," which would have raised tax rates on some high-income Americans, was never brought up for a vote for the fear that Boehner did not have enough votes to pass it. President Obama and Harry Reid had already refused to work with Boehner anyway, but it was an example of how difficult it will be for Republicans to hold their noses and vote for tax rate hikes.

The Associated Press' reporting is still promoting the idea that it's okay to go over the cliff and feel very little economic effect:

If New Year's Day arrives without a deal, the nation shouldn't plunge onto the shoals of recession immediately. There still might be time to engineer a soft landing.

So long as lawmakers and the president appear to be working toward agreement, the tax hikes and spending cuts could mostly be held at bay for a few weeks. Then they could be repealed retroactively once a deal was reached.

The big wild card is the stock market and the nation's financial confidence: Would traders start to panic if Washington appeared unable to reach accord? Would worried consumers and businesses sharply reduce their spending? In what could be a preview, stock prices around the world dropped Friday after House Republican leaders' plan for addressing the fiscal cliff collapsed.

We already know what that "big wild card" would do. As few as three weeks over the cliff, according to former Federal Reserve Vice Chairman Alan Blinder, would cause a recession. Stock markets and investor confidence would shatter after a mere three days over the cliff:

"Markets are putting a very low weight on the notion that we actually go over the cliff for more than three days," Mr. Blinder said. A delay beyond that "would really kick the chair out from under the markets' current belief" and trigger a wider reaction among investors and then consumers.

President Obama and Harry Reid's fiscal cliff plan, so far, has been nonexistent. Obama has proposed ideas but refused to coordinate with Harry Reid and write them down into legislation. He's claimed that merely taking up a Senate bill that passed in June would suffice, when that legislation does nothing about spending cuts or even supposed Democratic priorities like unemployment insurance. It doesn't touch the necessary patch for the Alternative Minimum Tax, which is perhaps the most important tax policy involved in the fiscal cliff.

Going over the fiscal cliff even for a small amount of time will likely cause a recession. There's certainly a significant faction of conservatives who think this is worth it because Democrats have proven so uncompromising on conservative priorities. But make no mistake: a recession would be highly likely, and would impact all Americans during a time of economic hardship and recovery from the 2008 market crash. Speaker Boehner thinks higher tax rates on the rich are worth avoiding that. It's still an open question as to whether President Obama is comfortable not getting everything he wants to avoid it. Click if you like this post! Tweet (function() { var po = document.createElement('script'); po.type = 'text/javascript'; po.async = true; po.src = 'https://apis.google.com/js/plusone.js'; var s = document.getElementsByTagName('script')[0]; s.parentNode.insertBefore(po, s); })(); $(document).ready(function () { var rndnum = Math.floor(Math.random() * 50000); var submitScript = document.createElement('script'); submitScript.src = 'http://townhall.com/wservices/handlers/tagcount.ashx?tid=,,,,&tnd=' + rndnum; document.body.appendChild(submitScript); }); Tags: Harry Reid , Barack Obama , John boehner , fiscal cliff , tax rates $(document).ready(function () { $(".feelings-widget").feelings({ url: "http://townhall.com/tipsheet/kevinglass/2012/12/27/fiscal-cliff-uncertainty-already-causing-economic-harm-n1474626" }); }); Kevin Glass Kevin Glass is the Managing Editor of Townhall.com. Sign-Up to receive Updates from TH Sign Up Breaking on TOWNHALL EPA Head Lisa Jackson to Step Down WATCH: Philly Public Schools Giving Out Free Condoms to Students Fiscal Cliff Uncertainty Already Causing Economic Harm Aetna CEO: Obamacare Could Double Insurance Premiums document.write(''); var OB_permalink= 'http://townhall.com/tipsheet/kevinglass/2012/12/27/fiscal-cliff-uncertainty-already-causing-economic-harm-n1474626'; var OB_Template='TownHall'; var OB_widgetId= 'AR_1'; var OB_langJS ='http://widgets.outbrain.com/lang_en.js'; if ( typeof(OB_Script)!='undefined' ) { OutbrainStart(); } else { var OB_Script = true; var str = ""; document.write(str); } Join the Debate 173 Comments So Far Login in to Post Your Comments « Previous123Next » Newest First Oldest First HarryReidAllAmerican Wrote: 2 minutes ago (1:29 PM) The GOP love of excessive military spending has nothing to do with support for our troops or love of country, and nothing to do with national security concerns.It has everything to do with the outsized number of the civilian defense contractors with operations in red states who don't want to lose any business!But they will. Login to Reply Flag as Offensive

Post Comment Jerry555 Wrote: 7 minutes ago (1:24 PM) If the Liberals like Dinjee Harry and Plastic Pelosi, would have let the Military fight the wars in Iraq and afghanistan, properly, then we would not be having this discussion, but the LIBERALS, cannot let a good chance to SCREW SOMETHING UP, go to waste. Login to Reply Flag as Offensive

Post Comment HarryReidAllAmerican Wrote: 5 minutes ago (1:26 PM) If we hadn't engaged in those wars in the first place, Reid and Pelosi wouldn't have had any affect on them!Listen to your own, listen to the paleos! RETREAT and RETRENCHMENT, baby! It's what we can afford in 2012. Login to Reply Flag as Offensive

Post Comment DEMShavenoSHAME Wrote: 2 minutes ago (1:28 PM) Do you honestly believe that the votes for getting involved in these wars were all republican? LOL! Login to Reply Flag as Offensive

Post Comment HarryReidAllAmerican Wrote: 7 minutes ago (1:23 PM) "We do not need to GUT the military, this is just the 'dream' of the Liberals, they want to weaken the USA."The USA does not need a military of the current one's size, to defend against a bunch of guys in caves and a China that isn't dumb enough to start a war a country that owes it money! Login to Reply Flag as Offensive

Post Comment Duke Nuk'em Wrote: 5 minutes ago (1:26 PM) HarryReidsBangedSphincter, And just which scum sucking liberal died and left you to make such decisions? Login to Reply Flag as Offensive

Post Comment Jerry555 Wrote: 4 minutes ago (1:27 PM) Hey Dinjee, how are the winos?We needed to protect our interests, but since ObowMao and Billary are in charge, half the ME has been ALL SCREWED UP,So we might as well pull out, and why notJust run some guns to the TERRORISTS,Like we did in BENGHAZI. Login to Reply Flag as Offensive

Post Comment There are More Comments on this Thread. Click Here To See them All DEMShavenoSHAME Wrote: 4 minutes ago (1:27 PM) The PRIMARY OBJECTIVE mapped out in the Constitution is for the role of government to focus on the DEFENSE OF THE NATION.You COMMUNIST. Login to Reply Flag as Offensive

Post Comment Hype_Blame22 Wrote: 2 minutes ago (1:29 PM) Thank you. Login to Reply Flag as Offensive

Post Comment Hype_Blame22 Wrote: 3 minutes ago (1:28 PM) The United States should have the largest, most powerful military in the world so that, regardless of money or "guys in caves," no one would even think about attacking American interests. Login to Reply Flag as Offensive

Post Comment HarryReidAllAmerican Wrote: 9 minutes ago (1:22 PM) "If this debt comes due, and the Fed quits printing money, HYPER inflation will result, and the USA will end up like Zimbabwe."No. Even hyper-inflation can be managed, and would be a small price to pay for the benefits of further quantitative easing. Login to Reply Flag as Offensive

Post Comment Duke Nuk'em Wrote: 7 minutes ago (1:24 PM) FILT. Login to Reply Flag as Offensive

Post Comment DEMShavenoSHAME Wrote: 6 minutes ago (1:25 PM) How about actually being a proponent of fiscal responsibility, and have Mr. Reid actually PASS A BUDGET.Note to liberals: If you have $100, you cannot spend $200!DUH!! Login to Reply Flag as Offensive

Post Comment There are More Comments on this Thread. Click Here To See them All rman859 Wrote: 4 minutes ago (1:27 PM) benifits? We lost 40% of 401K's in 2008, The rest will be eaten by inflation. The "benefit" is the middle class dies and we all become surfs of the state. the Pelosi's, Reids and ObaMaos stay RICH with their selected Donating Businesses. Login to Reply Flag as Offensive

Post Comment Jerry555 Wrote: 2 minutes ago (1:29 PM) QE, is printing money, this way they can buy more of the toxic assets, one day the dollar will be WORTHLESS,Which is the whole idea, to wreck the economy. Login to Reply Flag as Offensive

Post Comment DEMShavenoSHAME Wrote: 13 minutes ago (1:18 PM) I gotcher fiscal cliff RIGHT HERE, baby!!!ZZZZZIPP........BOINGGGGG! Login to Reply Flag as Offensive

Post Comment Ronald Reagan Fan Wrote: 16 minutes ago (1:15 PM) We are beginning to pay the price for electing an evil president. Do not think that the stock market is a sign that God is not judging America for voting for a president it knew is evil. There are many ways for God to correct us/punish us besides money. For example think of what could happen if Obama decides to cut certain defense operations. Login to Reply Flag as Offensive

Post Comment HarryReidAllAmerican Wrote: 10 minutes ago (1:20 PM) There is no USSR anymore, no arms race. Our defense operations are overblown and unnecessary. Obviously we need a standing military, nukes, hardware, etc. No one doubts that.What we do not need is to be the worlds police, force feeding banana republics "democracy" and guarding Finland against attacks from the defunct USSR. Login to Reply Flag as Offensive

Post Comment Jerry555 Wrote: 9 minutes ago (1:22 PM) Yea your right, ObowMao wants to make the USA the NBRA.New Banana Republic of America. Login to Reply Flag as Offensive

Post Comment There are More Comments on this Thread. Click Here To See them All Duke Nuk'em Wrote: 8 minutes ago (1:23 PM) HarryReidsBangedSphincter, And just which scum sucking libearl died and left you to make such decisions? Login to Reply Flag as Offensive

Post Comment Jerry555 Wrote: 16 minutes ago (1:14 PM) Wrong. Inflation is not the end of the world. -----------------Dinjee, what are you talking about, why not go for a drive in your caddy.The Printing of money and all of this borrowing, will lead to a demise.If this debt comes due, and the Fed quits printing money, HYPER inflation will result, and the USA will end up like Zimbabwe.Worthless.Which is the Plan, this is part of the "Fundamental Transformation". Login to Reply Flag as Offensive

Post Comment Jerry555 Wrote: 21 minutes ago (1:10 PM) This fiscal cliff deal, I believe, was put together by the Liberals, why on earth would anyone of the six Republicans, on the Super 12 committee, agree, that if NO DEAL was made, after November, that all taxes would go up, and the Military would be cut a massive amount.Both of these Ideas, are Dreams of the Liberals.This is why Dinjee Harry has OBSTRUCTEDAll bills since (actually all since he took office) June, so that they can blame the Republicans, and create this nonsense Fiscal 'Cliff', and get what they want.Raise Taxes and Gut the Military. Login to Reply Flag as Offensive

Post Comment HarryReidAllAmerican Wrote: 17 minutes ago (1:13 PM) The military needs to have its funding reduced, as it is needed less overseas. Login to Reply Flag as Offensive

Post Comment Jerry555 Wrote: 12 minutes ago (1:19 PM)
Read Full Article »

Latest On Twitter

Follow Real Clear Politics

Real Clear Politics Video

More RCP Video Highlights »