Obama Crislet and the Fiscal Cliff

I thought we would see a little boom if Romney was elected, but I had not thought about the flip side—an Obama Crislet. It is interesting that before the election there was almost no talk from the punditocracy and especially Obama about the large tax increases scheduled for 2013. Now this is on the agenda for immediate action, sort of. 

So President Obama has to make a decision, almost immediately, about how to deal with continuing Republican obstruction. How far should he go in accommodating the G.O.P.’s demands?

My answer is, not far at all. Mr. Obama should hang tough, declaring himself willing, if necessary, to hold his ground even at the cost of letting his opponents inflict damage on a still-shaky economy. And this is definitely no time to negotiate a “grand bargain” on the budget that snatches defeat from the jaws of victory.  

That was from everyone’s favorite Nobel prize winner Paul Krugman. 

Here is my advice to Speaker of the House Boehner: 

My answer is, not far at all. Mr. Boehner should hang tough, declaring himself willing, if necessary, to hold his ground even at the cost of letting his opponents inflict damage on a still-shaky economy. And this is definitely no time to negotiate a “grand bargain” on the budget that snatches defeat from the jaws of victory.

Obviously I know that there were few Republican victories last Tuesday, but if Obama really takes the line that Krugman suggests, and since this has been his line for the last two years this seems likely, then Boehner will have no choice. Four more years of extend and pretend will lead to a catastrophic failure.  It is better to have a lower deficit now, rather than ignore spending and tax increase as an option. 

We are better off with the two trillion forced spending cut combined with a 4 trillion tax increase than to do what Washington does best, nothing. Yes, there will be a recession next year. Yes, Obama will blame the Republicans. Yes, he will get away with it. But the deficit must be cut. 

As a second best alternative, letting Obama have free reign might be the best partisan option. That way when the crisis comes, the blame will be fairly placed. The economy will get worse no matter what happens. 

The biggest risk is that blame will be put upon free market policies. We do not have free market policies, and have not for decades, if then. If that happens, then we might end up with the troika of Argentina, Venezuela, and Greece as the modern template for a “modern” America. 

I think , as Ron Paul suggests in this clip, that we are already over the cliff, the question is, how hard will we fall?