The Upside of the Fiscal Cliff: Facing Reality is Positive

21 Dec

There are two definite upsides to the fiscal cliff:

1. We are finally starting a national discussion of spending-taxation trade-offs
2. We are at last starting to (grudgingly) accept there is no free lunch, what I call the Free Lunch Fantasy of limitless borrowing at near-zero interest rates: taxes for upper-income wage-earners will revert to previous levels while those drawing Federal dollars must accept reductions in spending.
Perhaps there’s a third upside – despite the damage higher taxes will have on the economy, at least with the demise of “Plan B”, tax rates on the lowest marginal rate will rise 50% – broadening the tax base, and reducing the 47% closer to 40%…
The fiscal cliff is one expression of this recognition, and it is very positive that Americans are finally facing up to the personal costs of dealing with reality: higher taxes and lower Federal spending are no longer abstractions to be borne by others. We will pay more taxes and we will get fewer benefits/Federal contracts, and these reductions in income will negatively impact the economy.
America voted for higher taxes – and higher taxes is what they’ll get…
Zero Hedge
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