Jump, Jump

"[P]articularly important given the current state of the economy, immediate spending cuts or tax increases would represent an added drag on the weak economic expansion."
Congressional Budget Office. "Economic Effects of Reducing the Fiscal Restraint That Is Scheduled to Occur in 2013" May 2012.

Despite the fact that this report was prepared in May of this year, an accurate conviction that Congress would not move to deal with the "Fiscal Cliff," as it has been named, until after the November elections has kept most news outlets quiet on the topic until now. But now that President Obama has fended off the Republican challenge, the alarm bells are ringing, long, loudly and often.

"The fiscal cliff as a whole, if it went into effect for all of next year, could result in a drop of 0.5% in real gross domestic product, according to the CBO. And that contraction could push unemployment to 9.1% by the end of 2013," says CNN.

But it turns out that it's not all doom and gloom. After all, according to NPR: "In today's report, the CBO says if Congress does nothing and the U.S. jumps off the fiscal cliff, it would result in a huge reduction of the deficit. It would go from $1.1 trillion to $200 billion in 2022. The debt would decline to 58 percent of the GDP in 2022."

So why not do it? After all, as the CBO points out: "If all current policies were extended for a prolonged period, federal debt held by the public—currently about 70 percent of GDP, its highest mark since 1950—would continue to rise much faster than GDP. Such a path for federal debt could not be sustained indefinitely, and policy changes would be required at some point."

So it's not IF we go over the "Fiscal Cliff," but when. The CBO goes on to say: "The more that debt increased before policies were changed, the greater would be the negative consequences. Large budget deficits would reduce national saving, thereby curtailing investment in productive capital and diminishing future output and income. Interest payments on the debt would consume a growing share of the federal budget, eventually requiring either higher taxes or a reduction in government benefits and services."

And it's not as though the consequences would be the end of the world. "The Greek government had forecast a fall in gross domestic product of 'only' 3.8 per cent, but the troika [the European Union, International Monetary Fund and European Central Bank] believes the fall in GDP is more likely to be of the order of 5 per cent, according to the Greek newspaper Kathimerini," says the Financial Times. And the current unemployment rate is 25.4%. And while Greece may not exactly be a model nation at this point, it's still there. The consequences of the Fiscal Cliff aren't projected to be anywhere nearly as dire. Of course, if we let things go far enough, the eventual consequences could be.

So maybe it's better to take that medicine now. Because it's only going to be more bitter later.