The Next Fiscal Cliff: More Political Theatre

The fiscal cliff is in the news again.  After (mostly) settling the tax side of the fiscal cliff in January, the big deal now is that if an agreement is not reached prior to Friday, March 1, $85 billion in automatic spending cuts will take effect.  That’s the dreaded sequester that has everyone so concerned.

The federal budget is $3.6 trillion, so $85 billion in budget cuts would reduce the budget by 2.3%.  How much of a calamity would that be?  Answer: As much as the federal government wants it to be.

To put cuts of that magnitude in a context working people can understand, part of the agreement Congress and the president reached in January, the last time we were headed off the fiscal cliff, was to end the temporary 2% cut in social security payroll taxes.  So, most workers found their budgets cut by 2% as a result, and seem to be coping.

Now, the president (and others) are telling us that if the federal government has to suffer the same reduction in its budget that it just imposed on most workers, we would suffer severe hardship.

Those in government can choose how much hardship to impose on us.  They can slow down air travel, impede the delivery of food by slowing down their mandatory food inspections, and impose myriad other costs on us if they choose.  But think about it: They would be imposing those hardships on us because they want to.  They are choosing to impose those cuts in the most visible ways possible because they want to make it seem like a cut this minor would be a major catastrophe.

It seems almost too hard to believe that President Obama — and other politicians — are telling us that if the federal budget had to be cut by an amount approximately equal to the cut they just imposed on American taxpayers, the American public would suffer greatly.  Yet that is what they are telling us, even as they design budget cuts to be as harmful as possible.

This is really nothing more than political theatre.  Calamity is looming, so the president and Congress get together to avoid a crisis that is entirely of their making.  They will then pat themselves on the back for avoiding the fiscal cliff they created.

What if they don’t reach agreement?  They are telling us that if they can’t agree, they will impose costs on us.  And remember, this sequester is not some kind of unavoidable natural disaster, it was designed by the very people who now say we will have to pay the cost for their being unable to agree.

We took our 2% cut in January with barely a whimper, as the president and Congress celebrated.  Now they are telling us that if they can’t figure a way out of this (minor) problem of their own making, we will have to bear heavy consequences.

This would have been settled long ago if the budgets of Congress and the White House, and the salaries of the legislators and the president, were included in the sequester.  They have no problem threatening us with dire consequences if they cannot agree.  But they have been careful to keep themselves out of the line of fire.

Randall G. Holcombe is Research Fellow at the Independent Institute and DeVoe Moore Professor of Economics at Florida State University. His Independent books include Housing America: Building Out of a Crisis (edited with Benjamin Powell); and Writing Off Ideas: Taxation, Foundations, and Philanthropy in America .
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