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| businessinsider.com |
On Bloomberg TV this morning, columnist Josh Barro expressed alarm that more and more liberals are saying: "Just go over the cliff."
BofA/ML analyst Ethan S. Harris is not a fan.
We’ve written about this before, but it
bears repeating: One of the most dangerous ideas circulating in
Washington is that it is okay to go over the cliff temporarily. This
increasingly popular view is that going over the cliff will make it
possible to strike a better deal.
Harris is correct that this idea is circulating more and more.
Liberals like it because the thinking is that it will force the GOP to
be in the position of taking the blame for the tax hikes, and that they
will have to capitulate on lowering taxes on the middle class, while
leaving the tax hikes in place.
Even if you assume that we could go slightly into January without
harming the economy much, Harris sees four reasons to be skeptical
They are:
- It's a contradiction that going over the cliff will induce a deal without hurting the economy. If we don't feel pain, what induces the deal? If we do feel pain, then it was a blunder.
- There's no reason a better deal would happen post cliff. More likely going over triggers a blame game.
- The GOP may take a hard line on reversing spending cuts.
- Going over the cliff will represent a dangerous way Washington does business.
What we really need is some number that indicates the kind of damage going into January could do to the economy.
But Harris makes interesting points, especially on the matter of
assuming that a deal would be easy once we go over. It could make both
parties dig in and wait until there's real damage.
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