Fiscal Cliff Or Fiscal Slope?

December 3, 2012 — 52 Comments

fiscal-cliff-taxes-congress

While Congress and the media obsess over the “fiscal cliff,” many politicians and economists are pleading for a re-branding of the term. Whether or not it should be re-dubbed a “fiscal slope,” “gradual fiscal slope,” “fiscal curve,” “taxmageddon,” “austerity crisis,” or other less exaggeratory term/phrase is a matter of opinion; but it doesn’t take an expert to realize that the mandatory budget cuts and tax hikes that take effect at year-end unless a deficit reduction deal is struck isn’t quite the doomsday that the word “cliff” implies.  As Ed Ardeni, president and chief investment strategist for institutional investor advisory Yardeni Research, put it: “We’re not going to fall off the edge of the earth at the beginning of next year. When you fall off a cliff you die. So it’s a bit of an exaggeration to say that’s what we’re facing here.” Similarly, Sen. Bernie Sanders (I-Vt.), noted that even if we go past the deadline by a month or two, “I don’t think a whole lot of people will know the difference…it’s not like something cataclysmic happens on Dec. 31.”

So what’s all the fuss about?  It’s true that over the long-term, if a deal is not reached, the economy could find itself in another recession.  The CBO estimates that by the end of 2013 unemployment would jump to 9.1%, real GDP would decline by 0.5%, and the average taxpayer would be burdened with a $3,500 tax hike.  However, missing the deadline does not mean that this scenario would be irreparable.  Lawmakers could still enact legislation after Dec. 31 and cut taxes retroactively to account for any increase taxpayers experienced in the previous month(s).  No one is arguing this is an ideal situation, but some on the left fear that the apocalyptic story that a “fiscal cliff” implies is pushing a Republican agenda for massive spending cuts in welfare programs; using a term like austerity crisis, as Washington Post and Bloomberg columnist Ezra Klein prefers, would make it less easy to justify these cuts.  The “fiscal cliff” rhetoric could prove to be another failure in Democratic messaging, akin to Obamacare over the Affordable Health Care Act, or job-creators over the one percent.  If “fiscal cliff,” is a Republican invention though, it’s not working well — recent polls suggest most Americans would pin the blame for a failure to reach an agreement on Congressional Republicans.

The above is not to suggest that all Democrats hate using “fiscal cliff,” or that all Republicans embrace the term.  Rep. John Shimkus (R-Ill) says that, “People are trying to scare us that it’s a cliff. I think people believe it’s a cliff, but I don’t know if you really know until you jump off.”  On the other hand, Democratic Rep. Jim Moran says, “Just keep calling it a cliff so we can get people to put the brakes on and come up with a reasonable way to stop the train of going in the direction it’s going,” and retiring Senate Budget Committee Chairman Kent Conrad (D-ND) adds, “I think it does communicate that you’re at a defining moment here.”  Even President Obama uses the term casually, as does his chairman of the White House Council of Economic Advisors, Alan Krueger, albeit in a less dire context than most.

00_REGS_FiscalCliff_zoom_659pxOne party that is undoubtedly obsessed with the “fiscal cliff” is the media. Dropping the term now could decrease interest in the subject, as audiences have become familiar with it, so it’s unlikely they’ll change their rhetoric anytime soon. POLITICO highlights some examples of the media’s flaunting of “cliff” rhetoric: “MSNBC has flashed ‘Fiscal Cliffhanger’ across its screen as it dissects the issue. CNBC has a ‘Call to Action’ special report on its website — subtitled ‘America’s looming economic crisis.’”  Even this blog is guilty — we’ve added a “Fiscal Cliff,” category for our posts and considered (although the idea was dropped after this post) changing our Federal Income Tax Filing Milestone on our home page to a fiscal cliff countdown.

With less then a month before the deadline, the “cliff” metaphor is here to stay.  “The impression has already been created, and if it’s unfavorable, we’ve got it now, and I think we’re saddled with it,” said Rep. John Conyers (D-MI).

If you’re not on the “cliff” bandwagon, our favorite alternative is a “fiscal black hole,” coined by Mark Zandi, former Chief Economic Advisor to John McCain‘s 2008 campaign and opposer to the “cliff” terminology.  He argues, “with each passing day that policymakers fail to act, the greater the gravitational pull of the dark recession that will occur if they don’t.”

Written by: Davis Burroughs

JDKatz, P.C. is a full-service law firm focused on tax law and estate planning. We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys.

52 responses to Fiscal Cliff Or Fiscal Slope?

  1. 

    I think this is one of the most significant info for me.
    And i’m glad reading your article. But wanna remark on few general things, The site style is great, the articles is really excellent : D. Good job, cheers

    Like this

  2. 

    You make some compelling points, which lead me to two thoughts.

    1) I am reminded of the R.E.M. song, “It’s the End of the World as We Know It (and I feel fine)”

    2) I’m going to go back and add “fiscal cliff” as a tag on my last two posts.

    Thanks!

    Like this

  3. 

    It’s about time that the congress and President Obama come to grips with reality. Eventually all this could result in a Fiscal Cliff, but I also believe that the term is an exaggeration. Great perspective on what is happening with Congress and the President.

    Like this

  4. 

    Fiscally Skewith…………………………………..
    Boom.

    Like this

  5. 

    Reblogged this on sarahjanelives and commented:
    Fiscal slope…….I like it.

    Like this

  6. 

    I belive dat my furture we be beright

    Like this

  7. 

    First off, thanks for the thought provoking post!

    As for my two cents on the matter, I merely raise my eyebrows for a moment when I hear such melodramatic titles being thrown about by the media and by our fearless leaders. I think I’ve become a bit desensitized due to the constant bombardment of hysterical propaganda in headlines. Yes the situation doesn’t look too pleasant, but we’ll survive somehow. I’ve tightened my belt and pinched my pennies for all of my young life to know that another day will come and we’ll get through this, melodramatic titles and all.

    p.s. I will admit that I am amused by the “Taxmageddon” term though.

    Like this

  8. 

    While I do agree that the term “fiscal cliff” is very alarmist, and as another commenter pointed out, very reminiscent of the actions of the Bush administration.
    However, I feel the term “fiscal slope” is inappropriate in equal measure. It subconsciously implies that the whole experience is going to be nothing more than a breezy down-hill ride, which we all know isn’t true.
    I’m not a Shakespearean writer so I do not know exactly what we should be calling it, but I do know that I disagree with both of these terms.

    Like this

  9. 

    http://www.youtube.com/watch?v=4ECi6WJpbzE Here is some good info that might explain why this is happening

    Like this

  10. 

    Wonderful work! This is the kind of information that are supposed to be shared around the net.
    Disgrace on Google for no longer positioning this put up upper!

    Come on over and consult with my site . Thank you =)Femme en ligne

    Like this

  11. 

    The term “fiscal cliff” is akin to the constant and prolonged state of panic and terror that the Bush administration placed on America with the color coded threat warning, which oddly enough rarely lowered below “orange” at airports. I enjoyed your take on the over-hyping of the whole fiscal cliff thing. I would like Americans to tune out some of the corporate media that continue to scare us into accepting their spin on legislative reality.

    I have written a couple of blogs on the subject and various political topics, click HERE and HERE if you would like to read some of my takes on this subject. Great post! I will be sure to follow your blog.

    Like this

  12. 
    Constance V. Walden December 5, 2012 at 3:54 pm

    Wake up and face it, it is the Democrats/ liberals/socialists who got us into this mess with their wild, unabated spending to make people dependent on them. Now they want small businesses to pay more money to them in taxes so they can feed that money to their supporters and to also line their own pockets.

    It’s the workers feeding the non-workers, and the non-workers giving their votes to the Democrats who will give them the workers’ hard earned income in return. It’s a vicious and unjust cycle. It does not work in Europe, and it does not work in any state of the U.S. held in bondage by Democrats. Look at California and every other state run by Democrats. Ruin and hopeless is found in them more than in other states. Now, Obama wants to make this nationwide and with every class and group…but, mostly the working and successful.

    Like this

  13. 

    Reblogged this on Reasoning with The Cunning One and commented:
    Interesting read

    Like this

  14. 

    Such a great post, thanks for sharing. Very thought-provoking. Congrats on being Freshly Pressed!

    Like this

  15. 

    Fiscal Cliff – just to show that the situation is grim, instead of calming people down as if everything is still alright with terms like “austerity”, “slope” etc..

    Like this

  16. 

    Reblogged this on Bored American Tribune. and commented:
    Dear readers: read this before panicking. — J.W.

    Like this

  17. 

    We talked about this in my class today. One of the biggest problems is entitlement. http://mccrackenlove.wordpress.com/2012/12/04/armageddon-because-we-deserve-it/

    Like this

  18. 

    Excellent blog. keep it up!

    Like this

  19. 

    Large trampoline at the bottom. Excellent blog. Thank you.

    Like this

  20. 

    I’m looking forward to the cliff! Isn’t this what the people voted for? The Republicans are screwed no matter how they vote; vote present and let all those Obama fans see what their vote got them. NOTHING! Perhaps they think the millionaires fair share will make their lives better? Good luck! Oh, they’ll be just where Obama wants them..with their hands out, their mouths open,..living in poverty..screaming to get more more more..of somebody-elses stuff….Well, I’ve got a parachute…..Kinda selfish? Well, so wasn’t the last election..I’m just looking out for myself…

    Like this

  21. 

    Where we are now reminds me of those old cartoons where like a rabbit or some toon character runs of a cliff (really) and is suspended in mid air with his legs oscillating rapidly for a few seconds before he crashes down.

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    • 

      Beep Beep! I think you are referring to the old road runner cartoons with Wile E. Coyote! Unfortunately, this is far more dire, and far less humorous.

      Like this

      • 

        Yeah yeah, that’s it! The consequences are far more dire, but the guys up on Capitol Hill dealing with it? Just about as clownish.

        Like this

  22. 

    I am not sure if it matters whether you call the state of our economy a fiscal cliff or fiscal slope, etc. I do not know if the middle class can take another tax increase. I was also informed that part of this fiscal cliff those of us who have mortgages will not be able to claim the interest (points) on our taxes. If this is the case, I do not think this is fair because we are getting enough taken away from us. How do you feel?

    Like this

    • 

      Mortgage interest deductions have been a bedrock of the tax code for sometime. The deduction isn’t unlimited however, and never has been.
      I think it’s an interesting issue for debate, because so many people claim the deduction, and the allowance of the deduction allows people to purchase homes they may not be able to afford otherwise. CBO has reported that elimination of the deduction could further destabilize an already shaky US economy with respect to existing home prices– I suspect that this issue will likely be resolved by further limits on the amount of indebtedness which is deductible.

      Like this

      • 

        I agree with you it is an interesting debate. Just as you said there are many people who claim the deduction (including myself). I do not know if I completely understand the logic of this concept. I think I will further this debate on my blog (www.letstalkrealestatedotnet.wordpress.com) to see if I can get others to chime in. I think it will be interesting see how others feel.

        Like this

  23. 

    You will have to let us know the outcome of your poll! I wonder if the respondents will be biased though after reading your blog. What do you think?

    Like this

  24. 

    The problems are much worse than a “fiscal cliff” – the taxation issue is a walk in the park compared to reality. See http://deadlyclear.wordpress.com/2011/08/11/david-stockman-we-have-a-far-worse-fiscal-situation/ …for starters. Can we correct the problem? Not if the politicians and judiciary are unwilling to follow the rule of law because they think they can protect their assets and pensions. Reality is that the money is gone – $600 TRILLION – Gone!

    Correction is made at the public level – not by elections but by removing our monies from Wall Street mutual funds and cashing in retirement and pension funds while we still can. First come, first served.

    And if you still think it can all turn around in our lifetime – Read “It Takes a Pillage” by Nomi Prins, read the DeadlyClear blog, read BAILOUT by Neil Barofsky… and then consider taking your hard earned funds out and purchasing something tangible or sustainable. Because, believe it or not, ANYONE could end up like Enron or Hostess employees – at any time.

    Like this

  25. 

    “What do you think the “fiscal cliff” should be called?”

    How about “the latest hysterical panic that the news is flogging because they got bored of death-in-your-medicine-cabinet stories?”

    Like this

  26. 

    Depends… It’s less of an exaggeration than the “war on Christmas” or the “war on stay-at-home moms” that the media demands nowadays. Blowhard rhetoric is the name of the game. Adjusting for media inflation, “cliff” is about right.

    Like this

  27. 

    Taxmageddon…hahahahahaha!

    Great analysis here. I wish the media would spend more time explaining the nuances as you have rather than opting for scare tactics and heavy-handed imagery.

    Like this

  28. 

    I like Fiscal Slope.

    Though Fiscal Cliff does imply the typical media rhetoric that paints ‘brave’ people as rising to the occasion (often in a pigheaded manner that does little to represent their districts), or ‘cowardly’ people from running away from what is necessary (necessary things being dictated by party lines, of course).

    Fiscal Slope, however, implies the exact same thing subtlety with a very long and drawn out math joke, that probably isn’t as funny as it is witty and isn’t as witty as it was really lame.

    Sorry.

    Like this

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