The Fiscal Cliff: Hubris of Small Differences

Marc To Market's picture

fiscal plans

This is one of the most revealing graphs we have posted.  This Great Graphic comes from the Washington Post's Wonk blog.  

 

First,
it shows that a step toward fiscal adjustment is coming to the US.  The
difference between Obama's plan and Boehner's is how the burden of the
adjustment should be distributed.  

 

Second,
chest thumping and the hand wringing that has surround the negotiations
seems dramatically out of proportion on the differences.  This is a
case of the hubris of small differences.  

 

Third,
the main difference, in terms of broad categories is that Obama is seek
to extend some of the stimulus and is paying for it through
discretionary spending cuts.  Obama has a bit more in tax increases
($1.2 trillion instead of $1 trillion)  and a little less in Social
Security/Medicare/Medicad mandatory cuts ($750 blns vs $1 trillion). 

 

Fourth,
claims that Obama is a socialist while the Republicans are defenders of
the free market and liberty cannot be supported by these differences. 
Contrary to the what the heated political rhetoric, most of the economic
debate between the Democrats and Republicans would take place within the
Tory Party in the UK.   This is just another way to say that the US
political spectrum is relatively small and is located in the right of
European politics.  

 

Fifth,
and related, the graph bears out a point that Obama made recently to a
Hispanic audience.  In response to a reporters question that some accuse
him of being a socialist, Obama noted that his policies would have made
him a moderate Republican in the 1980s.  The point here is not just
that the American political discourse is on the right, but that the
entire spectrum has shifted to the right, contrary to conventional
wisdom.  Consider that in the early 1970s,  Republican President Nixon
imposed price and wage controls. That Obama could be to the right of
Nixon in terms of economic policy is indeed thought provoking.