Everything You Need to Know About the Fiscal Cliff

Just in case you're confused about the details of the impending "fiscal cliff," here are three easy-on-the-eyes explanations/primers on what's at stake and what could happen.

First, Kevin Drum (but you should read the whole thing):

The fiscal-cliff way: On January 1, about $400 billion in tax increases and $200 billion in spending cuts will take effect. That's $600 billion, or 4 percent of GDP, and that would be a huge drag on the economy.

Also, here's The Week magazine with a solid write-up, and Ric Edelman with an even-keeled run down.

Bottom line: if it happens, the economy will suffer -- as will just about everyone.

  • rob black

    This was a huge and stupid political gamble on the part of the republicans….and they have already lost.
    Every good outcome for them depended on winning the White House and control of the Senate ….and they didn’t.
    On the tax side, the President will let the Bush tax cuts expire, then propose a series of middle class tax cuts to replace them. If the republicans drag their feet, or attempt to obstruct those cuts, it will be suicide for them in the midterms and they know it.
    On the automatic spending cuts that are supposed to take effect….those are across the board or not at all, and they include cuts in defense spending. The dems can hammer the house for cutting defense for months before any real damage is done, so they will have to vote to suspend those cuts..or risk the kind of showdown they lost when Clinton was in office.
    Of course, all of this will play out in the most over dramatized slow motion clusterfuck imaginable…which could have some negative effects on the market…but again, those can be laid squarely at the feet of John Boner and Eric Cantor where they rightfully belong.
    …..or the Repubs can take their medicine early and hope the bad taste washes out before 2014. They made this shit sandwich, now its just a question of when they are going to eat it, and how much.

    or….if they really do want to pay down the debt.

    • muselet

      Yes, the Rs have lost what you correctly call a “huge and stupid political gamble,” but they’re not going to stop fighting. They’ll whine and complain and continue to insist that this is all the fault of the Islamofascist Kenyan usurper, and they’ll play chicken the way they played chicken with the debt ceiling. When the time comes for defense cuts to go into effect, the Rs will stampede toward the nearest TV cameras and claim they wanted to negotiate a reasonable solution but those dastardly Ds wouldn’t compromise.

      The markets will respond in time-honored fashion (When in danger/Or in doubt/Run in circles/Scream and shout), Fox News Channel will blame the administration, the rest of our glorious news media will studiously avoid placing blame (or providing actual information about who’s responsible for what), and Very Serious People will stroke their chins and murmur disapprovingly about Both Sides.

      And the bamboozlement will come so hard and fast the public won’t know whom to believe and will blame “Washington.”

      In order for the most consequential parts of that not to happen, the Ds will have to do something that does not come naturally to them: they will have to behave like a cohesive political party.

      And the Rs don’t care about the debt or the deficit, full stop.


      • D_C_Wilson

        Republicans never stop fighting, no matter how many times they lose. Why do you think they’re still fighting cultural battles they lost fifty years ago? They will not rest until they’ve dragged this country back to the mythical Ozzie and Harriet world that existed only in their minds.

      • rob black

        At last! A fellow Kabuki enthusiast!
        So…lets play this out…
        “And the Rs don’t care about the debt or the deficit, full stop”
        No shit..
        What this scenerio forces the orcs to violate the holy of holys… against a tax cut.
        That is …the absolute beauty of the thing… if forces them to vioate the Norquist pledge!
        …..and the President has to do …..nothing…..
        Notice how they are slowly coming to Jesus. Oh..well maybe we can go back to Clinton era rates…blah..blah..
        They can only hope that is all they are forced to swallow.
        Like I said..they gambled …they lost. The only question left is …how big is the chip stack?

        • muselet

          I’m not as optimistic as you are. In part because the Villagers and the Very Serious People in our glorious news media interpret every belch and fart from the Rs as important, and in part because—as I said—the Ds will have to act contrary to their nature (“I don’t belong to any organized political party. I am a Democrat.” –Will Rogers) in order to make the Rs pay a price for their obstruction.

          Still, I do hope you’re right that the Rs will ultimately back down and pay a heavy political price.


          • rob black

            Believe me..I feel your angst…
            …but this really is a strategy in action. I have been watching it unfold for the last 3 years.
            There has always been a lot of talk about “11 dimensional chess..” etc..but frankly, this one was right out in the open.
            The Bush cuts were set to expire right before an election….
            Obama extended them..until right after an election..
            The mushy centrist bullshit media will do what they will ..but..
            He doesn’t have to run again, the leverage is gone.
            They will pretend to have “negotiations”about “a balanced plan” that includes “entitlements”…
            but how will the repubs force him to accept anything?
            He drew them by agreeing to a bargain during the debt ceiling hostage “crisis”….for a deal he would never have to take….if he won.
            ….and he did it to win.
            People are going to have to get used to living with second term Obama…and realizing that a lot of what he did in the first term..was so that he could get to a second term.
            It gets better….