海角大神

The Congressional Budget Office has just released an excellent analysis prepared by CBO economist Ben Page on the 鈥淓conomic Effects of Reducing the Fiscal Restraint That Is Scheduled to Occur in 2013鈥� (in typically dry CBO-speak).聽 I prefer to think of it as an economics version of the story 鈥淭he Little Engine That Could.鈥澛� You see, the 鈥渆ngine鈥� is the U.S. economy, and this so-called 鈥渇iscal cliff鈥� is, rather than something we are in danger of falling off of, something we are about to ram straight into鈥搇ike a huge wall just ahead on the tracks, at January 2013.聽 When economists and policymakers fret about this fiscal cliff, it鈥檚 not the usual worrying about the unsustainable deficits we are projected to run over the next several decades; it鈥檚 concern that our economy, still in 鈥渞ecovery,鈥� can鈥檛 handle the amount of deficit reduction that is scheduled to be forced upon us in just a matter of months.

The CBO analysis validates this worry, first defining the scale of the cliff as $607 billion worth of deficit reduction in one year (or $560 billion net of economic feedback, cutting the deficit nearly in half between fiscal years 2012 and 2013), then explaining that letting our economy run head onto this cliff will in fact, slow it down and perhaps even cause the 鈥渄ouble-dip recession鈥� economists have been fearing.聽 From the summary (emphasis added):

So CBO then looks at the question: what if we could avoid the cliff entirely鈥揵y sort of going around it?聽 Well, going around it would indeed keep us going in 2013:

So that sounds, good: if we can鈥檛 go through the fiscal cliff, just go around it (or just say 鈥減oof鈥� and imagine it away).聽 OK, I鈥檒l take that ticket鈥� Except, as CBO next explains, then the inevitable (real) 鈥渃liffs鈥� ahead just get taller and steeper:

You see, even over the longer term, the 鈥渇iscal cliff鈥� is more like one we will have to climb rather than one we鈥檙e in danger of falling off of.聽 And the higher the cliff gets, the harder it will be in the future to ignore it or continue to go around it, or actually get up it.聽 So going around and avoiding the cliff entirely isn鈥檛 a long-term option, nor necessarily the best option even now.聽 CBO explains the policy options, which I鈥檓 labeling as different strategies for driving the train called the U.S. economy toward the 2013 fiscal train stop.聽 The CBO concludes that there are three basic options (my labels and emphasis added):

In other words, the U.S. economy does face an 鈥渦phill battle鈥� in terms of the fiscal outlook; heading to higher ground (meaning lower deficits), eventually, is unavoidable.聽 But to quote from a particularly wise engine, 鈥淚 think [we] can鈥� do it.聽 The 2013 fiscal cliff is at least an opportunity to take a constructive attitude toward climbing that hill, and hopefully our policymakers, after the election, might have the wisdom and courage and work ethic needed to start turning that fiscal cliff into something our economy can more easily and successfully climb.