The Washington Post Loses It on the Fiscal Cliff

"Recession imminent if ‘fiscal cliff’ of tax hikes, budget cuts not averted, CBO says."

The Congressional Budget Office (CBO) projections for a recession are not based on Congress taking action before January 1 when the tax increases and spending cuts first take effect. The CBO projections are based on the assumption that Congress never does anything to offset the scheduled increase in taxes and cuts in spending. If, for example, Congress and the President were to reach a deal that took effect January 15th or 30th, then the vast majority of the negative impact would be avoided. It is very misleading to imply that the CBO projection in some way hinged on having a deal in place by January 1.

At one point the article referred to: "the scheduled deep cut in military spending." A real newspaper would write this as "the scheduled cut in military spending."

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written by JSeydl, August 23, 2012 8:21

This certainly isn't MY argument, but many would counter and say, "Yeah, well the uncertainty of having to change tax and spending policy at the beginning of 2013 and then having to change the policy back again would still be damaging." In other words, it would somehow hurt investor confidence if we went down the cliff on Jan 1., but then reversed the policies. I don't buy the argument -- the problem is that we have an enormous demand gap created by the housing bust, not unconfident investors -- but when many people dread about the fiscal cliff, I think that's the aort of argument they're trying to make.

We Are All Keynesians Now - WaPo Edition
written by Paul, August 23, 2012 9:20

What an interesting coincidence: now that all the posturing and posing of the deficit hawks has produced its logical outcome, suddenly the WaPo and assorted Washington Cons have become Keynesians who warn that cutting federal spending and raising taxes will cause a recession.

Were we not just lectured by this group that the B-S commission and Ryan's Path to Prosperity required massive spending cuts to reduce the deficit "time-bomb"?

The Washington Post Loses It on the Fiscal Cliff

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