Ask the question in the headline above to a politician, and he or she is very likely to respond with something about how the pressure of the intentional and inadvertent spending cuts and tax increases that are scheduled to go into effect around Jan. 1, 2013 — the fiscal cliff — will finally force the other side to compromise. Without that policy guillotine poised to come down on everyone’s necks, they’ll say, the gridlock on the budget of the past two years will continue or, heaven help us, intensify.
But ask that same question to a federal budget wonk like me and you’ll get a completely different answer. As far as I’m concerned, the one good thing about the fiscal cliff is that the debate has already produced significant results that completely contradict much of the nonsense (I’m really pulling my punches here) that’s been said about the federal deficit and that has made action on spending, revenues, the deficit and national debt much harder than it should have been.
Sadly, the fiscal cliff debate has also shown that the red ink in Washington will be far more enduring than any Member of Congress will ever admit.
Because of the debate over the fiscal cliff, we now know that even the fiercest opponents of federal spending — the ones who have been loudly insisting that what Washington spends kills jobs and hurts the economy and that the road to prosperity is paved with big cuts — don’t really know or believe what they’ve been saying.
The best example of this is the continued push by Pentagon contractors to prevent the military spending component of the sequester — the spending cut that will occur Jan. 2 because the anything-but-super committee failed to agree to an alternative deficit reduction plan — from occurring. The contractors acknowledge that the deficit will be reduced if the sequester occurs; they also say that the cuts will result in millions of job losses and, therefore, hurt the economy.
Lockheed Martin, one of the biggest of the big contractors, has threatened to send out notices to all 123,000 of its employees before the elections telling them that their jobs could be in jeopardy because of the impending sequester. That’s hardly the pain-free solution we’ve been told federal spending cuts will produce.
The Aerospace Industries Association, which for months has been warning about the employment perils if the military sequester occurs, last week issued a report on the negative effects of the whole sequester. This one concluded that, if the military and domestic spending reduction goes into effect, a total of 2.1 million jobs will disappear, gross domestic product will fall by $215 billion, and personal earnings of the workforce will decrease by $109.4 billion. Pain free? Absolutely not.