Monday, December 24, 2012

Don't fear the fiscal cliff!

By Frank Moraes 

Ryan Grim has written the best article I have yet read on the Fiscal Cliff, "Fiscal Fail: Government Agencies Plan Few Significant Changes For January, Despite Cliff Hype." He starts by explaining what readers of this site already know: nothing happens on 1 January. The stock market won't freak out. Tax collectors won't go door to door demanding money. And an asteroid will not collide with the earth. Instead, John Boehner's caucus will finally see that in fact they had no leverage all along and an agreement will be made to keep tax rates the same on the bottom 98% of tax payers.

I have been wondering how all of this would affect government agencies. In particular, the IRS has to tell businesses how to withhold taxes. And other government agencies need to know what to assume about their budgets. As Grim points out, they are all in agreement: they will proceed assuming that a deal will quickly be worked out: 

[T]he letter also holds clues to the agency's broader plans -- or lack thereof. The IRS told lawmakers it would not reprogram its system to account for the possibility the AMT would not be patched because "if Congress were to act at some point next year to enact a new AMT patch, the time and substantial expense necessary for the IRS to reprogram its systems... would ultimately be wasted."

Similarly, the GAO is looking well into the future:

The Government Accountability Office, charged with overseeing other government agencies, itself is not planning any January changes. Instead, the GAO is backloading any possible cuts toward the end of the fiscal year in June and assuming a deal will be reached before then, according to a source at the agency who isn't involved with the press operation.

At first, the only people screaming about the Fiscal Cliff were conservatives who knew that a deal made before the end of the year would be much better for them than one made in the new year. But somehow -- probably because there isn't much else to talk about -- the mainstream media have tried to turn these negotiations into a crisis. As Grim points out, however, just like with Y2K, the new year is going to come and everyone will be standing around wondering what the big deal was. 

(Cross-posted at Frankly Curious.)

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1 Comments:

  • My Social Security is on the block. You can damn well bet that I'm scared as hell!!!!

    By Blogger Kay Dennison, at 2:49 PM  

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