Ruth Marcus commits just about every major error in budget analysis in her Washington Post column this morning. To start with, she warns of the fiscal cliff at the end of the year:
"A fiscal cliff looms at year’s end, when a cornucopia of tax cuts is set to expire and a $1.2 trillion spending sequester kicks in. Like Wile E. Coyote, we are about to suddenly look down at a gaping void."
Wow, that sounds really scary. Of course this is the sort of nonsense that can only appear in the Washington Post and similar publications. Contrary to what Marcus wants us to believe, there is no Wile E. Coyote moment waiting at year-end. On the tax side, beginning in January we would start to see more money deducted from our paychecks. Since most of us are not paid in advance, we would first begin to see any effect on the tax side when we get our paychecks at the middle or end of the month. If there is an expectation that Congress and the President are likely to work out a deal that preserves most of the current tax cuts, then the impact on consumer spending and the economy in January will be close to zero.
On the spending side, the $1.2 trillion figure is one that makes sense if we assume that Congress will never revisit spending policy over the next decade. That's right, it has nothing to do with January of 2013, it refers to spending over the next decade. (Hey, this is the Washington Post.) The actual impact on spending in January is likely to be minimal, unless President Obama wants to slow spending to make a point. (The president has enormous control over the timing of spending.)
In short, there is nothing resembling a cliff or a Wile E. Coyote moment, these are fictions that only exist in the Washington Post and similar locations. The purpose of this fabrication is to advance their agenda for their preferred plan for spending cuts and tax increases. As Marcus tells us in the next paragraph:
"Behind the scenes, serious people in the administration and Congress, of both parties, are discussing ways to avert the economic shock of suddenly hiking taxes and throttling back spending. But there can be no pathway to success unless enough partisans on both sides give up on their foundational myths: for Republicans, that the fiscal challenge can be solved through spending cuts alone; for Democrats, that tax increases on the wealthy will suffice (emphasis added)."
Yes, thank God for serious people. You would recognize these serious people as the folks that were too thick to recognize the $8 trillion housing bubble, the collapse of which wrecked the economy; oh, and by the way, also gave us trillion dollar annual deficits. They were too busy yelling about budget deficits. (I'm not kidding, they were screaming about budget deficits even when the deficit was less than 2.0 percent of GDP.)
Contrary to what Marcus and the Serious People want people to believe, there is no spending problem, there is a problem of out of control health care costs. The United States pays more than twice as much per person for its health care as the average for people in other wealthy countries, with little to show in the way of health outcomes. If we paid the same amount as any other wealthy country we would be looking at huge budget surpluses, not deficits.
The deception here is simple and extremely important. Honest people would talk about the need to reform the health care system. That addresses the health care cost problem that the country really does face. Marcus and the Serious People would instead want to leave the broken system intact and just have the government pick up less of the tab.
This difference has enormous implications not only for access to health care but also for the distribution of income. Fixing the health care system means whacking the bloated incomes received by the drug industry, the insurance industry, the medical equipment industry and doctors (especially highly paid medical specialists). The route chosen by Marcus and the Serious People protects the income of these people. It instead will force lower and middle income people to get by without adequate care. This is the choice that the Post is doing its best to conceal from its readers.