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Fun With the Fiscal Cliff

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Hoofy & Boo tackle the nation's pending crisis/opportunity.

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J: Listen, both of you! I can't even handle physical confrontations with human beings, so if you two get out of hand, I'm going to have to end the debate. Keep your voices quiet and your comments civil!

H: Okay. Deep breaths. I'm in my happy place. Namaste...

B: Sorry. It's just that optimism gets me so damn frustrated.

H: Why's that, Boo? Help me understand.

B: Well, our elected officials have been unable to compromise over the last several years. Republicans in Congress have threatened to block anything that President Obama tries to accomplish and their unhappiness over getting trounced in the elections won't help matters. I'm sorry but I don't think the tax cut debate gets resolved in time to avoid the fiscal cliff.

H: But don't you think that with the issue of Obama's reelection behind us, Republicans in Congress might be more willing to compromise? It's no secret that they don't like him, but he's a lame duck now and the fiscal cliff, if it arrives, is in nobody's best interest.

B: Unfortunately, the Democrats might be so confident from their victory that they decide not to reward the Republicans for bad behavior. Paul Krugman is just one of many voices on the left calling for the president to call the GOP's bluff on the fiscal cliff. At this point, anyone offering any sort of compromise is seen as some sort of blood traitor!

J: No exclamation points. You lost that privilege.

B: Sorry.

H: Here's a question, Boo. Don't you think the prospect of going over the cliff is kind of exciting?

B: This isn't an economic bungee jump. Once we go down, we're not coming back, and it's long overdue. Free markets will be free markets over the course of time; inherent in that is that you can't have the good without the bad. That's the entire point of capitalism!

H: Oh, I don't think that's necessarily true. We've been arguing all year about what it means to be "rich" in America. Democrats are saying it begins at $250,000 a year, but Republicans have been saying that such a low bar might hurt small business owners. What if that us-versus-them debate were replaced by a shared rebuilding process?

J: So what would going over the cliff mean?

H: Well, for all the scary talk about it, it's basically an improvised austerity package which exacts a toll from both sides of the aisle. Raising taxes and cutting spending is exactly what deficit hawks have been encouraging for decades. Going over the cliff could see our deficit reduced from this year's $1.1 trillion to just $200 million; while that would be a bitter pill for the markets, it would be overdue medicine for our nation.

B: At the cost of what amounts to a reset of our nation's economy, with who-knows-what effect on the global economy?

H: Well, more economists are arguing that our current economic model is unsustainable. Maybe our elected officials will find common ground, and there's reason to expect that they might. And if not, maybe a hard reset is just what our economy needs. Either way, I would argue that if 2008 was the official beginning of the financial crisis, we're five years closer to the end of the bear-and the beginning of a secular bull market-than we were.

J: Okay, that's all we have time for today. You've both made some great points, or at least I assume you have. Mostly, I heard a lot of snorting and roaring. Finally, though, I'd like to see if we can find some common ground here, and to that end, I'll pose one more question to you both: human flesh?

B: Delicious.

H: Not delicious.

J: You guys are impossible. From all of us here at Minyanville Media, keep calm and carry on.

Twitter: @JonahLoeb
No positions in stocks mentioned.
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