The only reason to call it a fiscal cliff is to make people think that what will happen is terrible. The truth is that what will happen has to happen or the Feredral government will go bankrupt. Actually the Federal government is already bankrupt. They owe $16 trillion dollars and they have annual revenue of about $1.6 trillion. So they owe ten times what they earn annually. Any corporation or business would have declared bankruptcy a long time ago. Fourty percent (40%) of the Federal budget goes to paying the interest on the debt. Not paying on the principal mind you. Just to pay the interest. The debt keeps growing and the interest payments keep growing.
The truth is that we have to raise taxes on everyone and drastically lower expenditures so that we can start paying down the principal of the debt. If we don't do that then eventually the government will have to choose between paying interest and paying for essential programs. When they choose not to pay the interest then nobody will loan them any more money and they will be bankrupt. The value of U.S. currency will plummet and we won't be able to buy any foriegn products. When the world's largest consumer nation stops buying imported products because they are too expensive our trading partners go bankrupt because they are in the same situation as we are and they depend on cointinuing U.S. buying to keep their economies going. A world-wide depression will ensue that will make the 1930s look mild by comparison.
So it's not a fiscal cliff. It's what has to happen in order to survive financially. But I bet the sleezy politicians will come up with some gimmick to prolong the inevitable and avoid doing what has to be done from occuring automatically. They will claim it as a victory for bi-partisan compromise when actually they just continue to screw the Amercian public.
Actually they don't have to do anything. The tax increases (actually elimination of tax cuts) and reduction in expenditures will happen automatically if they do nothing and they can blame the other party. So the best thing that can happen is for grid-lock to continue.
KC
I agree except that we don't necessarily have to start paying on the principal - we just have to stop borrowing. If Congress was to balance the budget, we could let inflation take care of the principal over the next two or three generations. You did nail the problem, especially about how much we spend on interest and how that is crippling.
