Guest Post: Fiscal Cliff Contingencies

Tyler Durden's picture

Via Nic Bucheleres of NJBDeflator blog,

While debate over the Fiscal Cliff mostly centers around its latent whiplash effects on the United States economy, its inception is wholly a product of poor deal-making by politicians in Washington D.C. The series of agreements that led to what we know as the Fiscal Cliff began in 2010 in a divided "Lame Duck" session, where Congress passed the "Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010," thereby extending the Bush Era tax-cuts for an extra two years. Affected by these tax-cuts were individual, corporate, estate, and trust taxes, as well as Social Security employee payroll taxes.

The divergence between consumers and producers within the real economy that has stumped economists for the better part of 2012 can, at least in part, be attributed to the Fiscal Cliff; but the anticipatory effects of the Fiscal Cliff on the United States of America evidently began with American politicians, and probably for the worse, that is where it will end. The division that has plagued Washington has grown starker in recent years, and the divergence between consumers and producers as a result of divided leadership stands as a testament to the irresponsibility of those sent to Washington D.C. to serve their country. These divergences cannot last forever, and depending on the events of the next couple weeks, the United States is due for a reversion to the mean. The direction of that reversion—either production up to meet consumption or consumption down to meet production and confirm a recession within the United States—is wholly on the shoulders of the politicians in Washington D.C.

Starting April 2011, ratings agencies began issuing official statements warning of a possible US credit downgrade if Congress failed to reach a deal over the federal debt. Of course, Congress did in fact fail to reach an agreement on a bi¬partisan debt reduction pact, which prompted the debt ceiling to be raised. Days after Congress passed the "Budget Control Act" raising the debt ceiling for the 47t1 time since 1917, Standard & Poor's downgraded the US federal government credit rating from AAA to AA+, marking the first time in history that US debt was rated below AAA.

The impact of the one-time downgrade in the creditworthiness of US debt was minor, but it stands as an omen for what will befall the US in the event that the Fiscal Cliff is not resolved smoothly. Recent history with the federal debt/deficit underlines why the current Fiscal Cliff debate is so contentious, and the implications of a failure to responsibly address the issues of the Fiscal Cliff—both in the short- run and in the long-run—are the motivation for our exploration into the drag that such a political failure would have (and is currently having) on the US economy as analyzed through our model of Fiscal Cliff contingencies for various agents.


117723977 Fiscal Cliff Contingencies

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tooriskytoinvest's picture

Senator offers Cliff Alleviation at the Last Minute (CALM) Act… “This is not a great plan, merely a better plan than going over the cliff, “It should never have come to this.”

ball-and-chain's picture

We aren't going over the cliff.

The masters of the universe--Wall Street and London--want a deal.

So they'll get a deal.

They are in control.

The status quo will win out.

This is a lot of smoke without a fire.

goldfish1's picture

"They stayed six years and only paid rent for one year," said Haji Najibullah Khan, who grew up in the Pashengar house that became a US base. He said the departing US commander warned him off pushing for rent money when they met a few weeks before the soldiers drove away in the night."

Left holding the bag. 




davidsmith's picture

The masters of the universe didn't want Hitler either--but that's who they got.  You overestimate the power of the oligarchs during a crisis.  And plenty of oligarchs want an authoritarian solution for the U.S.--because the economy is in a terminal decline and it's easier to loot if cartels are state-sanctioned.


McConnell is doing exactly what coup leaders always do--he's upping the ante, changing the goalposts, anything to avoid a compromise.  It won't be long before he stops making pretty to please suburbanites.  Once the political system is paralyzed, the leadership will abandon the middle class and do what it takes to bring in an authoritarian regime.

If you think the fiscal cliff will paralyze the political system, wait til you see the debt ceiling.  And it will be done by arguing that the debt ceiling cannot be raised unless the tax and spend issues are resolved.


I haven't read many commentators stating the main effect of going over the cliff: it will be an AMAZING victory for the Tea Party.  Right after they got trashed after the polls.  But it is very often the case that the authoritarian minority loses support, forms a hedgehog defense, and then scores a major political victory.


NOTHING will move politically after we go over the cliff.  The political crisis will break wide open.  That will have the most disastrous effect on the economy.  Exactly what the Tea Party wants in order to argue for the authoritarian alternative.


Get ready!  Brown shirts on the streets, so to speak!

JungleJim's picture


I would like to know where you got that opinion of the Tea Party, I've found all the ones I've talked to to be strongly Liberterain


davidsmith's picture
  1. The libertarian position is a losing position. 
  2. As extremist parties turn into proto-authoritarian regimes (and you now have to look at the Tea Party as a government in waiting, whether it gets through the door or not), the decisions are increasingly made by the leadership, not by the base.  This is a backroom coup, just like Hitler's elevation to power.  Only in this case, there is no central leader; instead, a leadership group will emerge, and that's not necessarily anti-authoritarian--an authoritarian regime does not require an autocrat.  Franco wasn't one, and neither was Mussolini (for that matter, neither was Augustus).
Muppet Pimp's picture

Looks like Hillary's may end up too 'sick' to testify about benghazi.  What a travesty of justice this will be.  And empty suit Holder still running the show at the department of 'injustice'.

WAKE UP SHEEPLE!  Perhaps we need to take a page from the Latin American playbook and have activists put loudspeakers on the top of their cars so they can drive around spreading the news.  Bullhorning may be our last best chance to connect with the sheeple before they get sheared.



Lore's picture

We've been yammering over this for DECADES. The time for pre-empting is past. The only viable systemic mandate going forward is can-kicking. Tyler already knows, but the mainstream parrots still delude themselves into thinking the daily theatrics on TV matter in some real way. We'll have another 22 chapters just like Euroland and their goddamn Grexit.  When it finally collapses, the sheep will say "What happened?!  Why didn't somebody DO something?!  And politicians and banksters will disappear into the hills in their mansion bunkers...

If shearing is necessary to restore natural balance, then for Heaven's sake, let's get it over with ASAP, BUT LET THE BIG BANKS FAIL, AND LOCK UP A FEW HUNDRED OF THOSE RESPONSIBLE. As Robert Peel and so many other really GOOD men have stated for so long, "JUSTICE MUST NOT ONLY BE DONE; IT MUST BE SEEN TO BE DONE."

But you can see that it isn't happening that way. Sensible decisions aren't even discussed. Protection of cronies and socialization of misery is the name of the game.

Big Slick's picture

davidsmith is a leftist troll trying to obscure the real picture.  Ignore him.  How can McConnell act in any capacity of power? McConnell is as impotent as davidsmith's god Obama.  The only answer is for the people to turn off the TV and either demand change until it happens or effect change themselves.

Convervative Connection's picture

How is wanting a Federal govenment limited in scope and size to what is enumerated in the Constitution an "extremist" position?

tarsubil's picture

In the same way being sober is extreme to a severe alcoholic. Grand mal seizures, anyone?

cosmyccowboy's picture

he is just adding his hopes and dreams to the blank canvas of the tea party,,, that's what happens when your party is leaderless! as one who participated in both marches on DC and was there the day pelosi claimed to have gotten spit on i personally am very libertarian! i cannot speak for the rest of the 'tea party'... from what i saw during the march the vast majority are either already on are or are on social security!

  what he does not realize and neither do the powers that be is that there is another who has much more power than they who has his plans and they shall not be thwarted!

Salon's picture

Well. Then fuckin go to work brown shirts.

Lets see what y'all are made of.

I think they are a bunch of pussies and will cave in a week

Everyman's picture

Salon, you are a totally misinformed ass.

davidsmith's picture

This coup won't depend on the base, or the masses, period.  It will come in the form of a promise to get a collapsing economy back on track.

CH1's picture

The economy is about to get torpedoed... and not by Tea Partiers.

Anusocracy's picture

The voting public is about to be hoisted by their own petard.

Non-voters are the collateral damage.

Muddy1's picture

The dirty, rotten SOB's in the House and Senate should be run out of office for failing to take care of the country's business, keep us from the slavery of debt, and letting the country go down the drain.  Obama doesn't get off the hook either as he has seen fit to propose budgets that his Democrat controlled Senate has voted down.  The hell with 'em.!!!!!!!!!!

franzpick's picture

Cheer up.

If Mr. Market can regain his voice after Ben and Tim's strangulation attempt, the fiscal cliff dive and the ensuing bond, stock, bank and commerce collapse will reveal how quickly we are next approaching the political cliff.

franzpick's picture

You ABC, CBS, NBC and CNN corporate media goons: can you say "Political Cliff"? Can't you see the political cliff just coming over the horizon now? Practice saying political cliff, before your voices run dry during the probable upcoming financial and civil unrest.


CH1's picture

The dirty, rotten SOB's in the House and Senate should be run out of office for failing to take care of the country's business

At this point, the blame is also yours, for expecting politicians to save you. Get the fuck over it.

Nobody For President's picture

Run out of office? The President just gave them all a raise!

(A little one, but still...)

RSBriggs's picture

You have the Tea party very mistakenly mixed up with the fascist left - probably done deliberately.  You couldn't be further off the track - which makes me think your're just a lefty troll trying to misdirect your own actions onto others.  (Lefties always accuse others of doing exactly what it is they are pulling.)  The Tea Party wants a return to the Constitution, the rule of law,  fiscal conservativism, and minimal government.  Much closer to libertarian than anything else. 

Your bullshit doesn't fly...

franzpick's picture

I saw it too. When anyone sees trash in the road ahead, best to step over it.

John_Coltrane's picture

Indeed, those who know history understand what the tea party both original and current is really all about, "no taxation without representation!"  We producers will pull a Galt as is going on in France if the entitled groups (the affluent non-profit sector (i.e. .gov) push us too far.  We uniformly oppose any increase in the debt limit, and thus debt backed fiat currency and thus its pimp/enabler, the FED.    The Fabian Socialists, whose symbol is the wolf in sheeps clothing, as represented by Obama, his party, and the European nannycrats are all about one world government, collectivism, bailouts and total lack of regard for the individual and free markets.  The latter are the engine which drives the world.  Just ask yourself which party is the party of gun grabbers like Feinstein and Schumer?  And what do all fascist regimes do upon taking power-grab the guns.  It the same one which admires China for its complete top down control of the economy and all sources of information.

dogfish's picture

To Davidsmith

Who is it that is leading the charge to disarm the common man. Its not the tea party.  Obozo leads the brown shirts,now fall in.

savagegoose's picture

yeah +1, brown shirts are already there. TSA, homeland security, et al. armed guards at schools! WTF

show the kids what responsbilty is, owning a gun and protercting  the ones you love. not cowering in a closet and lying to them that " its all going to be alright, now shush! "

 the fucken teachers should be armed if they chose to be.

the tea party would never go for all the gov ran protections, its much easier and cheaper  . and freer , to let the cizens go armed.

grunk's picture

Someone will add an amendment that grabs all guns, but sign it quick, otherwise we go over the cliff.

Read it later.

Everyman's picture

Sen. Joe Manchin (D-W.Va.) has introduced a new bill that he says would soften the impact of going over the fiscal cliff.

It’s called the Cliff Alleviation at the Last Minute (CALM) Act, and Manchin says he’s not happy to author it.

“This is not a great plan, merely a better plan than going over the cliff,” Manchin said in a floor speech. “It should never have come to this.”

The measure would phase in the looming tax increases over three years, rather than all at once, and allow the Office of Management and Budget to pick which programs would be cut rather than having the across-the-board cuts contained in sequestration.

fonzannoon's picture

does the clam act do anything about the AMT?

Desp's picture

I was looking for that same info. I can't find a place to read the bill.. Where is the bill?

knukles's picture

You don't get to read it until after its passed.

nmewn's picture

So, situation normal then. Excellent!

Back to Hawaii!!!

Absalon's picture

I suggest an amendment: government cheques would stop going to people in Republican states.  That should reduce the deficit.  There should be minimal public backlash - Republican voters have said they want radically smaller government and so they should be onside with losing their personal benefits.

Everyman's picture

You are an ass. SO the "Republican States" have to keep paying in and not receive anything??? Only a lefty loon can think that way.  In a funny way you are proving "the majority" should be voting on reduction of spending for all and a requirement that those in the free shit army need to start fucking paying.

Go get your own fucking shit, o-phones, and income and quit welching off me.  You keep stealing, and you are going to have a hole in your fucking head.

nmewn's picture

lol...all for it!!!

Pick any "republican state" you wish and go and staple your fantastic new proposal to every light pole around downtown, grab a bullhorn and yell for everyone down there to come check it out!

I'll cover you from down the street...I promise ;-)

Karlus's picture

"I suggest an amendment: government cheques would stop going to people in Republican states."

Completely agree and would like to amend your bill with a rider stipulating no foodstuff, natural gas or oil be transferred from red state to blue. Starving with no gas to head anywhere.

Civil War checkmate.

Big Slick's picture

I agree.  Red States should go all John Galt on Washington's arse.  I'll send pictures of the Blue decay from my porch.

Rogue Trooper's picture

Go Amerika..... let's get the drinking ON!  -  A sing-a-long.... the chorus is easy enough.

Can't wait :X



Snakeeyes's picture

Obama WANTS to go over the fiscal cliff, raise taxes, cut defense spending and demonize Republicans. Wish we still had gold at Ft Knox!

grunk's picture

I know that sounds like his end game, but how does he get away with fucking over the Military/Industrial Complex? 

Especially in the D.C. area?

GeorgeHayduke's picture

So, defense spending is off limits for cuts and this is only about demonizing Republicans? Maybe you should go back to watching Faux news and listening to Rush. Reality will prove to be a harsh mistress for naive minds.

Oldwood's picture

Our world is so removed from reality no one will know it when they see it. BTFD!

Bob's picture

Fiscal Cliff has a dramatic ring, doesn't it?  Why would the finance industry be so strident about whatever austerity they can get everybody else to swallow?

America’s Deceptive 2012 Fiscal Cliff

Not that there's anything wrong with taking more advice from the Masters of the Universe, of course.

q99x2's picture

We need to replace them with an open source software system.

CashIsTrash's picture

I can't wait to wake up tomorrow, turn on CNBC, and see the DOW down over 800 points, all the while hearing all the fuckheads panicking!

Papasmurf's picture

Maria will become even more strident, her mascara running down her face.

OMG's picture

Naw she is used to being fucked by a hydraulic jack hammer tis nothng but a flesh wound

Ness.'s picture

Shit, the DOW will be trading -750 and she'll be blabbering how "the DOW is well off it's lows" - haha.  


Either way - I hope this fucker takes a big Happy New Year shit all over D.C.  


Kevin better get a good night's sleep tonight, he will be needed.