So … what happened? With regular coverage of the US “Fiscal Cliff” running up to the new year, PowerBlog readers may be wondering where the discussion has gone. While I am by no means the most qualified to comment on the matter, I thought a basic summary and critique would be in order:
- With six minutes to read this 157 page bill, the US House of Representatives passed it. (Note: either I’m an exceptionally slow reader or none of them could possibly have read it.)
- According to Matt Mitchell at Neighborhood Effects, the bill itself, comically titled “The American Taxpayer Relief Act,” has three strikes against it:
- “It ignored the evidence that tax increases are more economically harmful than spending cuts.” The bill puts the Cliff’s spending cuts off for two more months. (I see a sequel in the works: Fiscal Cliff 2: The Reckoning, perhaps?)
- “It opted to raise revenue through rate increases rather than loophole closings.” Why is this bad? “Put simply, a rate increase has deleterious demand and supply-side effects, whereas a loophole closing only has deleterious demand-side effects.”
- “It actually expanded corporate tax loopholes!” He continues by adding some valuable substantiation to this claim: “On the last point, don’t miss Vero’s pieces here and here, Tim Carney’s pieces here and here, Matt Stoller’s piece here, and Brad Plumer’s piece here.” The point: the primary (and likely the only) taxpayers who will see any relief from “The American Taxpayer Relief Act” are crony capitalists.
- Small businesses, on the other hand, will be hit the hardest by the bill. As Eileen Norcross writes at The Spectacle Blog,
With tax rates raised on those earning over $400,000 some may imagine that only a rarified tier of high earners will be forced to fork over more income to the federal government. However, tax increases in this category also includes [sic] small businesses. These hikes will affect decisions over hiring, expansion, and wages. The outcome — slower economic growth for all.
In summary, the bill—which the House had only six minutes to read—does almost nothing to address our debt and deficits, and what it does do is mostly negative and/or sub-optimal (unless you’re a crony capitalist, that is). Not only does this bill negatively affect most Americans today, it puts off, yet again, any hard decisions of reigning in our unsustainable spending addiction. We now have two more months before we careen over that cliff, but with how much time Congress had to negotiate an alternative deal before settling for a poorly designed, 157 page bill they only had six minutes to read, I’m not holding my breath.
In general, there seems to be an utter lack of urgency (or even awareness) when it comes to our duty of intergenerational justice. In fact, all of the urgency is in the other direction: protecting the unsustainable status quo no matter what the costs to future generations. By our reckless expenses we are spending tomorrow’s taxes today. Younger generations are paying in to programs that primarily older generations currently benefit from and, at our current rate, will not be there when younger generations reach the same age, despite any promises being made today.
Thus, wealth is effectively being transferred from the young to the old and at great opportunity cost. As Jordan Ballor wrote in his Spring 2011 editorial in the Journal of Markets & Morality,
[T]he premature restriction of economic opportunity, by the movement of capital from younger generations to older generations, has significant consequences for the course of future economic development. These consequences become even more pronounced when we factor in the reality that younger generations are, at any point in time, typically less wealthy in material terms than older generations. Younger workers have not had as much time in the workplace to earn wages, collect benefits, and save, as those who have been working for decades and are nearing or have already entered retirement. As we learn from what has been called the “miracle of compounding interest,” small deductions of available capital at earlier points in time have major consequences for long-term growth.
Too much of our concern has been to try to artificially stimulate the economy now rather than making a true investment in our future. If nothing changes, it is our children and their children who not only will get stuck with the bill but will endure further opportunity costs of deferred savings and investment.
However, while entitlement reform is necessary, it is not sufficient. In addition to the need for entrepreneurship and material wealth creation, the first form of wealth we need to cultivate is spiritual. We need a new moral culture that embraces an everyday asceticism, consistent with traditional Christian spirituality, aimed at responsibility, love, and generosity, beginning in the family and extending through every sector of society. As, again, Jordan Ballor put it in a recent Commentary,
Christians, whose citizenship is ultimately not of this world and whose identity and perspective must likewise be eternal and transcendent, should not let our viewpoints be determined by the tyranny of the short-term.
While cultivating such an ascetic ethos and moral culture is a long term project and requires individual initiative, it is, nevertheless, a reform that does not require us to wait around for Congress and one that can help us stand on our own feet, no matter what cliffs lie ahead.
