Why the “Fiscal Cliff” Is Really a Myth

All the talk of a ‘fiscal cliff’ come January 1 is misleading.

It implies that there’s something politicians can do to avert disaster in the new year — and that if they do it, all will be well.

The fact is: All is not well. The reason isn’t the sequestration law with supposed spending cuts and tax increases to take effect.

The reason is that the government is spending and borrowing way, way beyond what the private economy has the ability to produce — even if taxes are raised.

You can debate whether it’s worse to let America ‘go over the fiscal cliff’ or to make some kind of bipartisan deal (stacked in favor of pro-Big Government spending and taxation, as always).

It doesn’t matter. Either way, Americans are left with the reality that its government spends and borrows way beyond its means. Tax increases will not help this. Tax increases on ‘the rich’ will help this least of all. This is because ‘the rich’ are the ones who disproportionately spend and invest in the economy, whether it’s job creation, investment in stocks or private enterprises, or spending on luxuries. The more you take away from those with the most wealth, the less economic growth there will be.

It’s pointless to act and speak as if our fate lies with the ability of Obama and the hapless Republicans to ‘strike a deal’ that will somehow rescue us. There is no rescuing. The reason for this is that entitlement programs are bankrupting the nation. Social Security, Medicare and Medicaid (including the forthcoming universal coverage of Obamacare) way, way outstrap the ability of our hampered market economy to pay for them.

Nothing is going to change this fact. Nothing short of painful and inevitable privatization and phasing out of these programs will solve the problem. This is the reality no politician, to my knowledge, is facing, and the reality that no voter (based on the last election particularly) will allow any politician to face without losing his or her job.

Forget about whether ‘Republicrats’ strike a deal, or whether sequestration takes effect due to the lack of a deal. This will affect government agencies more than private citizens. This will affect private citizens insofar as it raises taxes, because tax increases will only make things worse for the general economy. But this is a concern to the government because of its spending habits, not because the government cares anything about leaving people free to keep what they earn.

If your house had foreclosed (and if government wasn’t bailing you out for it), then it would be absurd to start arguing over whether to get a new roof or pave the driveway. If you had run up all your credit cards way beyond their limits, it would be absurd to wonder how you’re going to cut your vacation budget. Yet this is precisely what our government is doing. No wonder the President is always scowling and the Speaker of the House is always crying. They’re unable to reconcile impossible facts, and they probably know it. But they’re never going to tell Americans the truth, and a majority are unwilling to hear it if they did.

A majority still believe that government can ‘somehow’ fix Social Security, Medicare and Medicaid. Most oppose increased borrowing or increased spending, and a plurality probably don’t approve of increased taxes. But there isn’t enough taxing, spending and borrowing in the world that could fix this. If it could, the government could simply pass a law stating, ‘Let there be wealth,’ and there would be ample money to fund all these programs and still leave people prosperous to the end of time.

This is, in fact, kind of what the Federal Reserve does by inflating the money supply in circulation every few months, but this subject of economics is too abstract and arcane for most Americans. They just want these politicians ‘to put their heads together and fix this problem now.’ It sounds so reasonable, but the level of magical thinking required to evade even the most obvious of fiscal facts is simply too staggering for me to put into words.

Our government is doomed, but the people don’t have to be. When we speak of what human beings are capable of, I am the most optimistic person there is. The capacity for reason, individualism, free markets, technology and science to solve ever-more problems over time is virtually limitless. But the kind of problems the government has created (with majority consent) are outside solution. We cannot direct government to do the impossible, and then expect it to do the impossible.

You cannot offer unlimited coverage for retirement and medicine to millions of people permanently into the future, all for nothing, and expect it to be cheap or even affordable. Everybody is allegedly entitled to this coverage, but nobody in particular is responsible for providing it. Everyone, whether he pays a dime in taxes or not, is told, ‘You paid for it.’ Imagine a beautiful four-bedroom house paid for by two people but which fifty-five individuals are all equally entitled to live in. It would be madness. That’s the madness our government has created—and which most of us expect them to fix, even though it’s unfixable.

The ‘fiscal cliff’ as it’s currently reported is a myth. Avoiding that cliff is not possible. Arguably, we went over that cliff some time ago, and we’re in a free fall right now. All the craziness and politics you read about represent an effort in denial to avoid the truth.


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