In The Seattle Times and on Twitter; on CNN and on the lips of that news-obsessed friends always talking about politics, just about everyone seems to be obsessing over it. The daunting name it’s been given certainly sounds scary, but is somewhat misleading to many people.
What is it, exactly?
Paul Krugman half-metaphorically described it as a bad poker-game and another doomsday prophesy to be generally ignored. In his TED talk, Adam Davidson called it “the self-imposed, self-destructive arbitrary deadline about resolving an inevitable problem,” since calling it by it’s given name is apparently too partisan, though it’s not clear who which side it is partisan against. Some others feel that failure to avert this would bring on another recession and possibly an economic crisis in its wake on par with the dreadful bubble-burst of 2008.
The most common reference, however, seems to be a sentiment so unanimous in the people I’ve talked to that it’s often stated independently nearly verbatim – something along the lines of “I’m going to punch the next person who mentions [the cliff that shall not be named].” Perhaps this shouldn’t be surprising, since we’re still kind of getting over the hype and drama of the recent presidential election. Watching another government-splitting drama over nothing is a bit like missing the weather because your news station insists on replaying the most recent train-wreck of some celebrity’s life over and over again.
Is it worth taking seriously? The answer by all serious accounts seems to be ‘not really.’ So why is it such a big deal?
Any news-length article that attempts to answer that question risks oversimplification by several orders of magnitude, and would probably require an economist, a social psychologist and political-science expert to even begin to explain all of the issues, but there seems to be a misunderstanding about history and economic terms that leads to an incredible amount of fear; fear over a sort of economic end-of-the-world scenario.
In reverse order, there’s an economic term that’s very misunderstood by many Americans, and that’s the word “recession.” Ever since 2008, the word recession has been associated with the word “depression,” a mistransliteration that has generated a whole lot of anxiety in the American public less-educated in economics. While a depression is basically a period of sustained, long-term economic inefficiency and characterized by high unemployment and a generally lower standard of living, a recession is merely two consecutive quarters of negative GDP growth. There can be a correlation, to be sure, but they are far from the same thing – recessions are a natural part of an economic cycle, on just about every scale, and can even be healthy.
To put things in perspective, the two most serious depressions in recent US history (the Great Depression in 1929 and the Subprime Mortgage Crises of 2008) came suddenly out of relative growth and economic expansion.
The other problem is a misunderstanding about history – about how taxes affect the economy in general, since many Americans are under the impression that higher taxes lead to worse economic growth. While there’s anecdotal evidence for both sides of this argument, we should all at least be able to agree on one thing: returning tax rates to where they were in years past, in years of relative economic success as a nation, is not a decision that will herald the end of America. Taxes today are at one of the lowest rates in American history – they are not constantly growing, as many more paranoid folks seem to imagine. An illustrative point can be made that marginal tax-rates for the highest-earning Americans are at a mere 35%, while the very successful economies of Finland, Denmark, Sweden, Japan and Belgium seem to be doing just fine (better, in fact) with tax rates approximating 50%.
Overall, the artificial, arbitrary time bomb of mild political discomfort we’ve been discussing is about as scary to an average American as it sounds. The only thing we have to fear, in FDR’s words, is the fear itself.