Friday, December 7, 2012

Fiscal Cliff FAQ

There seems to be a little confusion as to what the effects of the Fiscal Cliff are, so here's some help.

1. What is the Fiscal Cliff?

It's a package of spending cuts and tax hikes that'll take effect on the 1st of January unless Congress acts to overturn it.

2. I've spent my entire career protesting about the deficit. Is the Fiscal Cliff bad?

Can you clarify your question?

2.1 OK, I'm against the deficit because I truly believe the government shouldn't have such a deficit.

Then the Fiscal Cliff is ideologically sound to you. Although many economic models, including those based upon Keynesianism, say that it'll end up increasing or doing nothing about the deficit because decreased revenues due to a stagnant economy and accompanying deflation will also be the result. But you don't believe in Keynesianism anyway, so that shouldn't be a problem. To you.

2.2 I'm against the deficit, but that's because as I understand it, it's a "bad thing", that's caused by "wasteful government spending", such as the government spending money on things I don't like, and not spending enough on things I do.

Then you should worry about the Fiscal Cliff because while it cuts money to things you don't like, it also cuts money to the programs you support. Also it too is a "bad thing", like the deficit. That is to say, it is something lots of people are worried about, and you sound like the kind of person who worries about things that other people are worrying about.

3. I'm concerned about my job. Is the Fiscal Cliff going to help?

No, your job will objectively become less safe if we go over, although some economists argue that long term, because most models point to a complete collapse of the economy, or that such an action will somehow cause all badly run businesses to fail while leaving all well run businesses alone (it's not clear what model they're using), you'll find it easier to get a job, probably in 2032 when the economy recovers.

4. I don't have a job because I have a lot of money, several million dollars actually, hidden under my mattress. Will the Fiscal Cliff help me?

Kinda. Make sure you don't let anyone know about the mattress though.

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