The term fiscal cliff is biased.
In 2013, if Congress does nothing, the Bush tax cuts will expire. Spending would be reduced by $1.2 trillion spread out over the next nine years. Since this would reduce interest on the debt by $216 billion, actual federal program spending would need to be reduced by only $984 billion. Divide by nine, and the spending cut in each fiscal year is $109 billion.
The U.S. debt is about $16 trillion. For the past four years, the deficit has been more than $1 trillion per year. In 2012, federal spending was $3.7 trillion.
Therefore, if Congress does nothing, in 2013, instead of spending $3.7 trillion, the federal government would spend about $3.6 trillion; and tax rates will return to what they were under President Clinton.
This change in fiscal policy would reduce our deficit. It also may slow economic growth or even lead to another recession. But characterizing a law as creating a "cliff" is biased.
Is continuing to have $1 trillion deficits each year any less of a "cliff?" Those who use this phrase should specify what we should do instead.
Should we keep the Bush tax cuts? Should we maintain the current level of military spending?
Jonathan Karmel
Castleton-on-Hudson