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Why DC’s Business As Usual Crowd Fears The Fiscal Cliff

Lost in all the media handwringing about the “fiscal cliff” is the reality of exactly who is going over the “cliff.”

Congress liesWere the federal government to implement just the spending cuts mandated by the fiscal cliff, over the next two years the deficit would be reduced by $430 billion or more.

Most Americans who hear that would say “Hoo-Rah, keep cutting.”

However, the biggest problem for Washington’s business-as-usual crowd isn’t that going over the cliff will reduce the budget; it is that when the federal government goes over the fiscal cliff, a number of establishment lies about federal spending will be exposed.

Perhaps the most egregious lie that going over the fiscal cliff will expose is the practice of legislating an annual “doc fix” to temporarily eliminate mandated reductions in Medicare payments to health care providers.

Back in 1997, Congress passed and President Bill Clinton signed as part of a deficit reduction deal, a law that limited the rate of increase in Medicare provider payments to the rate of growth in the Gross Domestic Product.

As The Washington Post noted, every Congress for the past 15 years has temporarily reversed this policy, known as the “Sustainable Growth Rate” or SGR. If the “doc fix” is not extended, physician payments would fall by almost 30 percent, dwarfing the cuts enacted as part of the debt ceiling deal and cut spending by $14 billion next year.

Of course this drastic reduction in payments to hospitals would certainly drive many smaller or less financially stable hospitals out of business and such a reduction in payments to doctors would force many physicians to stop taking Medicare patients or go broke.

But let’s be clear – Congress has been kicking the can down the road on Medicare reimbursement rates every year for the past 15 years.

The obvious answer to this problem is not to ruin doctors and drive hospitals into bankruptcy. It is, to paraphrase Democrat Rahm Emanuel, not to "waste" a crisis and finally, after 15 years of Congressional procrastination, actually fix Medicare.

Putting the Medicare program on an actuarially sound footing by going to a system like the one proposed by Paul Ryan -- or at least raising the Medicare eligibility age -- would eliminate all or part of Medicare’s impact on the deficit and get rid of the need to pass a “doc fix” every year.

These commonsense solutions are regularly opposed by Democrats, such as New York’s Senator Chuck Schumer, who are desperately trying to hide the effects of their redistributionist policies behind accounting gimmicks like the “doc fix” that mask the real cost of government from the voters.

As Avik Roy noted in Forbes, “Going over the cliff means that the accounting gimmicks are over. No more “temporary” this and “temporary” that, so that Congress can pretend to be more fiscally responsible than it is actually being.”

If Roy is right, and going over the fiscal cliff means that Americans will finally be told the truth about the cost of all the government they keep voting for -- and that all the lies about spending and all the accounting gimmicks will finally be exposed -- the day the federal government goes over the fiscal cliff and takes Washington’s business-as-usual politicians with it can’t come soon enough.

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I wonder

If the fiscal cliff brings the deficit down to almost nothing in the couple of years, and if we go into recession because of the fiscal cliff, doesn't that prove that the federal government has way too much influence on the nation's economy?  Are we not better to have the cliff, suffer the pain, clear the books, and start anew?  Isn't that more like capitalism?  

Health care and insurance

Health care is controlled by the insurance companies. Make insurance non-profit and take it off of Wall Street. Why should some one paying $12,000 for shares in an insurance company be entitled to dividends but someone that pays $1000/month for a year be dropped if he misses a payment. Insurance should be owned by the insured.

"..all the lies about

"..all the lies about spending and all the accounting gimmicks will finally be exposed..", this applies to every sector of the economy... at least every part that has been 'bubbled', overextended, overleveraged, where the Primary Dealers have monitized... for the benifit of the Banks participants.

As we are lamenting the ;Cliff'/debt, we are actually seeing the 'bubble-burst' of a monetary easing that has been happening for years.

I think of it as a all encompassing subsidation model. Like most subsidized programs, it only prevents a true market to exist, a free market. We have the subsidize(Tax,regulate and susidize) part of the buisness model to keep Fiat inflows being spread around and keep jobs/pay taxes back to the Fed to return the Fiat back to the source.. and not have too much M1 or inflation happen.

But this model depends on 'bubbles'. Each Burst requires another bubble to escape the the damage of the previous burst. The swing is getting larger each time, bubble-burst-bubble-burst.. How does a Worldwide Fiat Easing Bubble find relief? What extreme must happen to facilitate this newer, more extreme bubble? A New World Order/Fiat? Aliens? Total financial colapse? War(III?)?