Fiscal cliff is hardly the end of the world

Federal Reserve chairman Ben Bernanke at a news

Federal Reserve chairman Ben Bernanke at a news conference in Washington (Sept. 13, 2012) (Credit: Getty Images)

Dan Janison

Melville. N.Y. Tuesday January 26, 2010. Daniel Janison, Dan Janison

Dan Janison has been a reporter at Newsday for 10

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Maybe it's a funny coincidence, but threats of budgetary apocalypse in the nation's capital seem to keep cropping up in sync with unearthly end-of-the-world scenarios.

Remember May 21, 2011, the day radio Bible interpreter Harold Camping predicted for the Rapture? The day passed, and life went on. By summer, fiscal Armageddon loomed -- in the form of a partisan standoff over the nation's debt ceiling, stayed by a legislative deal.

Now an opaque interpretation of the Mayan calendar is supposed to have set doomsday for Dec. 21. And in tandem, the Washington mainstream is touting a "fiscal cliff" at the end of the year -- offering another overheated political deadline drama.

Under current federal law, a host of fiscal changes begin to phase in automatically after new year's if Congress does not agree to alter them. Various taxes would rise and deep cuts would take effect in programs as varied as defense and social services. This is what they call the cliff -- a metaphor that's been employed by Sen. James DeMint (R-S.C.) and Federal Reserve chairman Ben Bernanke alike.

You'd think that sailing off this kind of cliff would sound more attractive to deficit hawks, since it promises to shrink the federal budget gap dramatically. Why aren't they calling for a nice ride over the precipice?

Well, for one thing, we all know the elected officials who argue that fiscal salvation must come from shielding the military but restructuring Social Security aren't the same ones who say the rich should shoulder more of the tax burden. That is, everyone sees something to dislike if the laws take effect as written.

In addition, fiscal insiders warn of serious economic damage if lawmakers fail to reach agreements. Last week, in a speech to the Economic Club of New York, Bernanke said: "The realization of all of the automatic tax increases and spending cuts that make up the fiscal cliff, absent offsetting changes, would pose a substantial threat to the recovery." The Congressional Budget Office also says it would force the United States back into recession.

Strategically, the cliff metaphor may offer useful wiggle room in hard talks to come. Democrats and Republicans could walk away with a compromise by saying concessions were needed to avoid the scary "cliff."

But some argue that the budgetary landscape for the White House and Congress resembles not a cliff at all but a very negotiable slope -- and that changes needn't be rushed during a lame-duck Congress.

"The fiscal cliff is not a 'cliff' and the country isn't going to fall off anything at the end of the year," wrote Dave Johnson, a fellow with the progressive Campaign for America's Future, on the Huffington Post. "The effects [of the preset tax and spending changes] in the first few weeks will be minimal," wrote University of Texas economist James K. Galbraith.

The "cliff" might actually be a pile -- of cash, for lobbyists. Lee Drutman, senior fellow at the nonprofit, nonpartisan Sunlight Foundation, issued an analysis Tuesday that said: "Any grand bargain on spending and revenue will go right at the heart of two of the most heavily lobbied issues in Washington: budget and taxes. Pick any tax loophole or any budget line item, and there's almost certainly a lobbyist there to pressure dealmakers to pick a different loophole or budget item."

What better sign could there be that life as we know it will go on?