6 Reasons the Fiscal Cliff is a Scam

by James K. Galbraith

November 22, 2012  |  Stripped to essentials, the fiscal cliff is a device constructed to force a rollback of Social Security, Medicare and Medicaid, as the price of avoiding tax increases and disruptive cuts in federal civilian programs and in the military.  It was policy-making by hostage-taking, timed for the lame duck session, a contrived crisis, the plain idea now unfolding was to force a stampede.

In the nature of stampedes arguments become confused; panic flows from fear, when multiple forces – economic and political in this instance – all appear to push the same way.  It is therefore useful to sort through those forces, breaking them down into separate questions, and to ask whether any of them justify the voices of doom.

First, is there a looming crisis of debt or deficits, such that sacrifices in general are necessary?  No, there is not.  Not in the short run – as almost everyone agrees.  But also: not in the long run.  What we have are computer projections, based on arbitrary – and in fact capricious – assumptions.  But even the computer projections no longer show much of a crisis. CBO has adjusted its interest rate forecast, and even under its “alternative fiscal scenario” the debt/GDP ratio now stabilizes after a few years.