Search This Blog

Monday, December 17, 2012

"Fiscal Cliff" or Fiscal BLUFF?

Do you think Congress is totally partisan?  (Note to my Tea Party impaired friends, "partisan" means "prejudiced in favor of a particular cause", that is, either Democratic or Republican in this case.  It does not mean, "Contrary to my current beliefs".)  Partisanship has been most dramatically manifested by the Republicans voting lockstep against any Democratic proposals regardless of merit, some of which they once supported or even invented themselves!  Even so, I don't think they're uniquely partisan.  Because the one issue both parties agree upon is kowtowing to the super rich.
Let me define "super rich".  A super rich person already has so much wealth that his lifetime material security is guaranteed.  The pathologically super rich, though, become unhappy if their wealth fails to increase every moment in time.  Any involuntary cost, even though it will have zero lifestyle impact, even though it might actually benefit them, is tantamount to a physical assault.  This includes taxation.  (Whether this arises from overly controlling parents, or not being held enough as infants, we can only speculate.)  Those who benefit from the Golden Goose that lays their golden eggs, the infrastructure that makes wealth possible, need to help feed the goose.  It is impossible to single handedly create wealth in a vacuum.  But neither party seems to have the guts to ask these folks for sufficient revenue to protect and build our Commons.  (Yes, that's capital "C" Commons.  Please review the definition.)

Which brings us to the topic at hand, the fabricated myth of The Fiscal Cliff, lions, tigers and bears, oh my!  (Will we ever develop immunity to irrational, baseless fears?)  "The Fiscal Cliff" rolls off the tongues of pundits in every media with little explanation of what the hell it actually is or why, or even if, it is a bad thing.  Personally, I think we should let "it" happen and I'll explain what "it" is in a moment.  But before that, start thinking of The Fiscal Cliff instead as a snowy Fiscal Bluff over which we're about to take a fun glide on our Fiscal Sleds,  ("Bluff" being an intentional double entendre).  The Fiscal Cliff is an exaggerated, astoundingly nationalistic & partially manufactured distraction from vastly more serious issues such as the poisoning of everything we ingest & global climate change. issues nobody wants to deal with until it is too late.  Which it probably already is.  But . . .

To put it simply, our economy will tumble over the Fiscal Bluff in January, supposedly, when two job killing events will occur:  higher taxes caused by the expiration of the Bush tax giveaways, and, precipitous cuts in government spending.  Media and political dufuses somberly lament that this will allegedly send unemployment sky high and the markets into a ravine.  You would think an asteroid is hurtling towards us.  Some people perversely lust so much for this to be true that they're firing otherwise profitable employees (need I say Papa Johns?).

The first odd thing you will note about these two devilish horns is the implication that government spending creates jobs, which is true with one major exception.  The exception is military spending which, although it does create jobs, only creates one-third as many as, say, building a domestic school or bridge.  The second odd thing you will note is the implication that taxes create unemployment, which is false with few exceptions.  These two views are incompatible.  So reality must be somewhere in between.

The details are too lengthy to post here, but that's the beauty of the Internet (which arose from government programs, by the way).   Do your own research and don't believe anyone, including me.  So, in anticipation of this sleigh ride,  what do you do with your money?  Stash it in places that will protect it from any market declines but which will also participate in market gains should those occur.  Yes, there are such places.

To be continued . . .