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December 23, 2012 7:58 AM Cliff-hanger: what will happen once we fall off the fiscal cliff? Not much, apparently

By Kathleen Geier

Could the fiscal cliff be the 2013 version of Y2K? The Huffington Post’s excellent Ryan Grim reports that this may indeed be the case. As you will no doubt recall, after a year of dire forecasts about how computer systems around the world would crash on January 1, 2000, the predicted apocalypse failed to materialize. Similarly, the much-hyped impact of the fiscal cliff is shaping up to be a big nothingburger.

As Grim writes, the fiscal cliff is “a combination of automatic tax hikes and spending cuts scheduled to go into effect Jan. 1.” But federal agencies have long been preparing for the possibility that no deal would be reached by then, and, says Grim, they are pretty much “planning to carry on as usual.”

For instance, the IRS has no plans to begin immediately withholding higher tax amounts from paychecks. Similarly, various government departments and agencies, like the Government Accounting Office and the Departments of Defense, Energy, and Health and Human Services have no plans for layoffs or cuts. The one group that is likely to suffer is workers who rely on federal unemployment insurance, which kicks in when state benefits expire after six months. But according to Grim, those workers “would be eligible for back benefits once a deal is cut.”

So all those Very Serious People who have been encouraging us to panic about this stuff . . . now that they see that the results of falling off the cliff won’t be catastrophic, they’ll calm down, right? I mean, there’s no point in needlessly freaking people out.

But wait, not so fast! What about . . . the invisible bond vigilantes?

Never fear! The Very Serious People are reporting sightings of them already:

“Wall Street has been way too sanguine about the fiscal cliff,” said independent political analyst Charlie Cook. “Sure, there will be a deal, but it could be next week. It could be February or March. The more exotic, meaning ideological extremes [on the left and right] are not yet ready to do what is necessary.”

Some things never change!

Kathleen Geier is a writer and public policy researcher who lives in Chicago. She blogs at Inequality Matters. Find her on Twitter: @Kathy_Gee

Comments

  • MuddyLee on December 23, 2012 9:57 AM:

    Who are the leftwingers in Congress often mentioned in the mainstream media? Can anybody count them? Kucinich? He's gone. Bernie Sanders? Who are they talking about? The republican party in Congress OWNS crazy - and they should be forced to own up to it.

  • Eric Riback on December 23, 2012 10:17 AM:

    The "Y2K was nothing" myth continues!

    The way Y2K was averted was that thousands of programmers working 24 around the clock (here and around the world) eliminated the software code, prior to the new year, that would have caused a calamity.

    And the way Federal agencies are planning for the fiscal cliff? Do nothing, it seems.

  • Burr Deming on December 23, 2012 10:26 AM:

    I do wish the coverage was a little less about what Democrats or Republicans need to give up. In reality neither will give up a dime in these negotiations. The actual balance is between the basic needs of the very vulnerable, joined by the burdened middle class, and the interests of those who are financially beyond such mundane concerns

  • c u n d gulag on December 23, 2012 10:28 AM:

    I've long been calling this "The Fiscal Molehill," since, if there's a cliff on a molehill, it ain't gonna be too large, or scary.

    TV News talking heads need viewers, newpapers need readers, and Right-wing Talk Radio needs stupid, ignorant, gullible, racist, misogynist, xenophobic, and/or homophobic morons to tune in.

    It's tough to sell a "Fiscal Molehill," when a cliff hits the reptilian fear glands in the brain.
    Even dinosaurs, with brains the size of walnuts, knew instinctively not to get too close to the edge of a cliff.

    And what the Talking Heads in the MSM don't want to mention is, that letting all of the Bush tax cuts expire, is the quickest was to pay down that (not very) scary, or historic, debt/deficit.
    And if we do reinstate the middle class tax cuts, all it does is delay the payback for a while.

    Will we have military cuts if no deal is reached? Yes - and they're badly needed.
    But we don't need SS cuts. Or Medicare cuts. Or Medicaid cuts.

    Cutting THOSE, is scary.

    Not coming to an agreement for a few months, while letting Big Business keep the pressure on the Nihilistic Republicans, may have some unexpected consequences in the interim - but knowledgeable people KNOW the consequences of "Austerity." And those who don't know, should just take a look at Europe.

  • David Carlton on December 23, 2012 10:32 AM:

    Just clicked through the link to the FT article; it says nothing about "bond vigilantes." Cook is talking about "Wall Street," by which he clearly means the stock market, not the bond market. Certainly it's hard to spot a bond vigilante when ten-year treasury yields *plunge,* as they did on Friday.

  • schtick on December 23, 2012 11:42 AM:

    I still say those lazy bums we elect should put THEIR salary, perks, pensions and perks on the table. That has more of an effect on the budget than SSI and Medicare and Medicaid combined. Let them work for just a little over minimum wage and punch a timeclock. Let's see if they show up for the more than two days a week average for a year that they do now.

    crapcha....ursdwat settlement....HA!

  • Keith M Ellis on December 23, 2012 11:48 AM:

    People are weird about the Y2K thing. I suppose it's unfair to expect people in general to be aware of the very large amount of resources that were devoted to preventing it. Also, it is true that the threat was proven to have been overestimated. Y2K bugs were like the "toxic assets" of the time — a problem that everyone knew existed and was large, but the true scope was mostly unknown because it was hopelessly obscured. In the end in both cases, most of the threat was known only it when it was revealed (or not) by time.

    So we didn't have a doomsday because partly the problem was mitigated by an enormous amount of last-minute work beforehand (where "last-minute" equals about eighteen months, or so) and partly because the threats were necessarily exaggerated because the true scope was known to be large but unknown and, without hyperbolic alarmism, much of the preventative action that was taken, wouldn't have been.

    In these ways, arguably this is a poor comparison to the fiscal cliff. We do know, more or less, the scope of the threat. But it's not a "cliff" and so the threat of it as a hard deadline is simply false.

  • square1 on December 23, 2012 12:07 PM:

    The need for the scary-sounding, yet vague euphemism "fiscal cliff" is because both politicians and journalists would look like complete clowns if they openly stated what they believe to be the problem with current law: The deficit is being cut too quickly.

    That's right. After years of whining about the deficit and the need for austerity, suddenly the 3/4 of the Village is in a panic because, yes, the deficit is being cut too quickly. Or more accurately, the wrong people -- the wealthy and defense contractors -- are for once among those who are being asked to join in the shared sacrifice. So, the current battle is all about shifting the spending cuts and tax increases to less powerful constituencies.

    Naturally, politicians would be stupid to openly state all this. And, as usual, most journalists are too lazy, stupid, or corrupt to point it out.

    But most Americans want higher taxes on the wealthy and less defense spending and would consider the current "cliff" to be not remotely scary if explained using something other than scary metaphors.

    An argument can be made that the cuts that are scheduled to kick in are contractionary and untimely given the current weakness in the economy. It is a legitimate argument. But it is also an argument that Republicans and Centrist Democrats have largely ignored for 4 years. For these people to suddenly morph into Keynesians when it comes to defense spending is absurd.

  • POed Lib on December 23, 2012 12:20 PM:

    The Y2K thing was real, and Keith Ellis is 100% correct. It was not a serious problem BECAUSE people took it seriously and rewrote programs to fix. It took a huge amount of work. It's just ignorant to claim that it was not a problem. Fires in houses are not much of a problem BECAUSE people have smoke detectors. Should we eliminate smoke detectors due to the lack of a serious problem? That would be stupid

  • jjm on December 23, 2012 1:53 PM:

    Eric Riback on December 23, 2012 10:17 AM: Every government agency to be affected is under orders to prepare for that right now.

    The thing that is so ridiculous about this is 1) the GOP demanded this cliff in exchange for allowing the US to pay the bills it has already incurred and 2) the GOP House has passed fiscal cliff legislation: to void the defense part of the sequester.

    The GOP has not one iota of interest in cutting spending if it doesn't stick it to the poor and the middle class. They want to see the less well off squirm and suffer. They actually say it outright. They want 'painful cuts' -- sadistic bullies.

  • Jeff on December 23, 2012 2:01 PM:

    As someone who did PR in the late '90s for a company selling a Y2K remediation tool, I concur with Keith and Eric above. A lot of people did a lot of work to fix stuff that could have caused a lot of problems at a specific moment in time.

    In a sense, the "fiscal cliff" is the exact opposite of Y2K. No one is doing any real work. Instead, they're screaming about the urgent need to fix something which won't cause any immediate problems and may not cause any in the future.

    The GOP is all PR and no product.

  • Crusty the ex-Clown on December 23, 2012 2:41 PM:

    It's a cliffical fist, not a fiscal cliff. The GOP just ran into it out of pure cussedness, and bets are still out on whether or not their bosses are capable of learning from their own mistakes. It's clear that a significant portion of the rank and file are either dumb as a sack of hammers or simply batshit crazy, but one can always hope that there are still a few functioning neurons amongst the alleged leaders.

  • BJ smith on December 23, 2012 2:55 PM:

    The GOP is all PR & no product. Jeff, a perfectly astute comment on these worthless lazy bums. They came to Washington not to work for the country, but for the explicit reason of saying NO, both before the election & after.They laugh at the often quoted, "elections have consequences". It is sickening to the core! This bunch will never reconcile, they will take the country down rather than do so.

  • SecularAnimist on December 23, 2012 3:01 PM:

    Kathleen Geier wrote: "As you will no doubt recall, after a year of dire forecasts about how computer systems around the world would crash on January 1, 2000, the predicted apocalypse failed to materialize."

    That is a REALLY, REALLY BAD parallel.

    I have worked in the IT field as a programmer, system administrator and network manager for 25 years.

    And I can tell you that the Y2K problem was very real, and very serious, and the reason that the "apocalypse failed to materialize" is precisely because people recognized that the problem was real, and worked very hard for a year to fix it.

    I was one of the people who spent many hours installing the Y2K software patches provided by every major software vendor in the world, and I know programmers who spent far more hours than that rewriting thousands of lines of legacy COBOL programs to eliminate Y2K problems.

    Y2K is a perfect example of a very real and very serious problem that was recognized and dealt with successfully to avert what otherwise would have been a disaster.

    To give Y2K as an example of an imaginary or exaggerated problem is just plain wrong, and with all due respect, ignorant.

  • John Broughton on December 23, 2012 3:02 PM:

    Besides getting the Y2K issue wrong (see earlier comments), the article misstates the role of the IRS. The IRS is not who withholds taxes - that is done by individual employers. I'd guess that what was meant was something like this: "The IRS has no plans to issue revised withholding tables to employers."

  • mudwall jackson on December 23, 2012 5:32 PM:

    the real crisis isn't the effects of tax increases and budget cuts, at least not at this point, but rather the inability of congress to govern that this exposes once again. all thanks to our irresponsible friends on the right.