Fiscal Cliff: All News Is Bad News

As I sit down to write this commentary, it appears unlikely Congress will reach any deal today (Sunday) to avert the dreaded fiscal cliff. Monday is another day, of course, and I have a sneaking suspicion they will ultimately come up with something just so they can say they did.

 

But let’s not kid ourselves that Congress will do anything that makes the nation’s fiscal situation better. It’s going to get worse no matter what happens. The only question now is how they dress it up.

 

And we should start by remembering that the only reason we’re facing this “crisis” is that Congress and the White House created the crisis. They’re the ones who set tax rates with expiration dates. They’re the ones who refuse to index the Alternative Minimum Tax and so have to “fix” it every year. They’re the ones who messed with the inheritance tax such that it’s about to jump up to 55 percent, with an exemption of only $1 million.

 

They’re the ones who introduced a whole host of new taxes to pay for Obamacare, and decided to put them into effect at the same time as these other tax rates were scheduled to rise.

 

Finally, they’re the ones who are including no serious spending cuts in any discussion of what to do about the nation’s larger fiscal mess. We’re about to run our fifth consecutive deficit in excess of $1 trillion. (Did you notice this week that Obama once again complained that he “inherited” this deficit? I bet you didn’t know George W. Bush still controlled the budget.)

 

This entire exercise is an illustration of how completely incapable of governing this nation the federal government has become. What we should have are permanent tax rates within a simple tax code. There should be no question of scrambling at the last minute to avoid automatic tax increases, or panicking over automatic spending cuts for that matter.

 

Set a tax rate. That’s your tax rate. If you want to change it later, take a vote on doing that. But when you make a tax rate temporary, all you do is create uncertainty within markets. As I write this, no one knows what tax rates will be two days from now. That’s ridiculous. That is no way to run an economy.

 

The same is true with spending. Pass a budget that sets your spending for the current year. That’s what you’re going to spend. Setting automatic spending cuts for dates in the future is insane because a) no one knows what the nation’s needs will be at that time; and b) future Congresses can always rescind the automatic cuts, and probably will, so the only thing you can really control is to be responsible with your budgeting, taxing, and spending right now.

 

Of course, that would require you to actually pass a budget, and Senate Democrats haven’t done that since 2009 because to do so would be to reveal to the American public how totally irresponsible they are with their borrowing and spending. So they fly by the seat of their pants and end up scrambling at the last minute to avoid a crisis they created.

 

It seems inevitable that some Americans are going to see their taxes go up no matter what kind of deal Congress comes up with. And if they don’t come up with any deal at all, then all Americans will see their taxes go up.

 

But no serious spending cuts will be made, and nothing serious will be done about bringing spending into line with revenues. We will keep deficit spending, keep blowing up the national debt, and keep ducking the job of restructuring the entitlement programs that are driving our deficits.

 

That’s because these are serious decisions, and Congress doesn’t make serious decisions. They make it up as they go along, create crises, and then cause new problems with the “solutions” they come up with to avert the crises they create.

 

It’s astounding to realize Congress is working this hard to come up with a deal that will accomplish nothing positive for the American people. No matter what the ultimate news from the fiscal cliff talks, it will not be good news.