What if the Fiscal Cliff Is the Wrong Cliff?
One premise of the people who built the “fiscal cliff”—who committed Congress to either make big inroads on the deficit or have big inroads made automatically, meat-cleaver style—is that government debt is central to our economic problems. What if they’re wrong?
I don’t mean “What if public debt isn’t a problem?”—because it is, and I don’t doubt that addressing it in some measure is a good idea. I mean: What if public debt is such a small part of the problem that we’re setting ourselves up for pain followed by disappointment? What if we’ll make lots of budget cuts, dampening economic activity in the short term, only to find that the long-term benefits, while real, are dinky in the scheme of things, and there’s a much bigger problem that’s been left unaddressed?
That’s the view of some analysts whose voices aren’t getting much airtime amid all the freaking out about the fiscal cliff. They say that private debt—mortgages, credit card bills, business loans, etc.—is a much bigger problem than public debt, and we’re going to have to confront it before we truly recover from the great recession.