Going over the fiscal cliff is basically austerity on steroids. It means that taxes will rise suddenly for nearly everyone. It means large, blunt, abrupt cuts in government spending ó and some reckless, destructive ones as well. If the situation lasts more than a few months, it will almost certainly trigger a recession in the United States, the second one in five years. It would probably unleash a global recession as well.
The bigger unknown is whether allowing the country to go over the fiscal cliff very briefly ó mainly as a negotiating technique ó would lead to a modest, temporary wobble in the economy, or whether it could, like the fall of Lehman Brothers, spin out of control in ways we arenít anticipating.
But hereís my larger question: If the country canít come to an agreement now, when will the prospects be better? The ingredients for a deal are well known, and there are multiple plans and ideas on the table. The American people are focused on this issue, and so are their leaders. The 2012 election is behind us, and thereís only so much time before politicians start focusing on the next one, with all the posturing and politicking upcoming elections bring with them. Would that be a better environment for negotiating a prudent, fair-minded agreement?
The stakes here are high, and pushing the problem down the road raises them. Suppose the calculation that the economy can withstand a brief plunge over the fiscal cliff turns out to be wrong. Then weíll have to confront our budget problems in a recessionary economy, not a recovering one. And then, our choices will be even more painful.
So thatís my question: If not now, when?
Jean Johnson is a senior fellow and special adviser for Public Agenda. She has authored several books as well as a series of guides published by Harper Collins designed to help citizens understand complex public policy issues, all written with Public Agenda senior fellow Scott Bittle, including Where Does the Money Go? Your Guided Tour to the Federal Budget Crisis.