In a recent article by Peter Schiff, he makes the case for the fiscal cliff not being a problem we face, but rather a part of the solution to the economic crisis facing America.
According to Schiff, politicians need to design a cliff that " ...is actually large enough to restore fiscal balance before a real disaster occurs."
He sees the probable disaster being enormous, saying, "That disaster will take the form of a dollar and/or sovereign debt crisis that will make this fiscal cliff look like an ant hill."
Schiff blasts Obama for his disingenuous plan for dealing with the fiscal cliff, which will do nothing to mend the economy.
All Obama can do is do the politically correct and acceptable raising of taxes on those Americans making over $250,000 a year. He claims that no one making under that amount will pay more in taxes.
What's wrong with this, other than the huge percentage of taxes already paid by the upper 2 percent of earners, which as of 2008 was 43.6 percent of all taxes paid? It would only bring about $30 to $40 billion annually into government coffers.
That's like someone giving someone that needs to pay $800 in rent, but can't, a couple of bucks to handle the situation. It's all smoke and mirrors to make it look like Obama is actually doing something. He isn't.
Schiff points out that even if the government were to tax them twice as much, it would only cut about a third of the deficit. That also assumes there would be no slowdown in the economy as a result of the taxes. Again, this is a political move, not a real attempt to deal with the economic crisis America faces, which must deal with slashing spending in a meaningful manner.
In other words, we need to go through some pain because the promises made by the government are unsustainable. As Schiff says, if it isn't dealt with now, kicking the can down the road will only make the cliff higher and deeper, which will result in extraordinary circumstances that are in general predictable, but as to the depth of the forced cuts in spending, will hammer those who have become dependent on government instead of taking care of their own wants and needs.
Schiff also points out that the fiscal cliff, in and of itself, is a good thing. The government would be forced to spend less while taxes would pay more for its operations. That, after all, is what must and will be done, whether it's intentionally done or forced upon them by reality.
In the end, if the fiscal cliff were to go forward, the federal budget deficit would be slashed by almost half of the current $1.1 trillion spent in 2012 to about $641 billion.
As usual, politicians and the clueless financial and business media thinks somehow this is a negative outcome. No it isn't. It's exactly what's needed ... and more.
Schiff concludes with this:
It is amazing that members of Congress can keep a straight face as they claim to want to address our long-term deficit problem while simultaneously working to avoid any substantive action. No doubt an agreement will be reached that will replace the looming fiscal cliff with another one farther down the road (which they can easily dismantle before we actually reach the precipice). Will the rating agencies buy this bill of goods a second time? If we lack the political courage to go over this fiscal cliff, why should anyone think we will be able to stomach going over the next one? Especially since each time we delay going over the cliff, we simply increase its future size, making it that much harder to actually go over it.
And this doesn't even begin to deal with the over $220 trillion in unfunded liabilities the nation faces.
As for the idea the weak politicians now in power have an ounce of political courage is laughable. They will bring the country down around all of our heads because they place their own jobs ahead of the health and economic survival of America.
One way or the other a day or reckoning will come. A ponzi scheme like that built by the alliance between the Federal Reserve and the U.S. government will end badly for most people. Anyone affected by this needs to build a strategy based upon this being the end-game of the process we're in the midst of going through. It will happen.