Yes, you read that headline correctly. So, why are the deficit hawks running scared over this? This is what you guys have wanted all along, and next year you just might get it:
If all you wanted to do was to reduce the deficit as quickly as possible, here’s one very simple way to get it done: Go off the fiscal cliff.Did you catch that? Economists are worried that we would pay off this debt too quickly, which means less government spending and a further drag on the economy. Virtually all of the current debate is about whether we should reduce the deficit by a lesser amount. I'd be interested to hear what the folks over at the Liberty Coalition have to say about this.
Do so would result in about $720 billion in total austerity in 2013, and it would bring down the deficit that year in some of major ways, including $180 billion from income tax hikes, $120 billion in revenue from the payroll tax, $110 billion from the sequester’s automatic spending cuts, and $160 billion from expiring tax breaks and other programs, according to Bank of America’s estimates.
So when businesses and politicians fret about the economic fallout from the fiscal cliff, they’re reacting to the consequences of dramatic deficit-reduction in the short-term. It would save the government hundreds of billions of dollars next year, but would also take away the equivalent 4.6 percent of GDP through tax hikes and spending cuts—a sharp fiscal contraction that economists say would be a drag on growth in a still-tepid economy.
Remember this when you're sitting at the neighborhood tavern or chatting around the water cooler.