The Democrats want an agreement that raises income tax rates for the wealthy, limits deductions, and reduces payments to health care providers, but seem unwilling to touch unfunded social security entitlements. They would also like to stimulate the economy with more government spending. They do not want an increase in the debt ceiling to be part of the negotiations. They insist on an open-ended debt ceiling. They seem irritated the U.S. constitution requires all bills of revenue to be originated in the House of Representatives.
Republican Senator Orrin Hatch stated he believed it was irresponsible for the White House to say they were prepared to go over the fiscal cliff, and put the economy, jobs, and family incomes at risk, if they do not get their way. The political parties seem to have far different worldviews, with a large gap between.
The problem is the U.S. economy has been built on $54 trillion of credit that the private sector is now incapable of repaying. Without government intervention, the economy will collapse in a deflationary spiral, as market forces bring supply back into equilibrium, with demand at a much lower level of economic output and employment. Federal reserve printing of money can not off-set both de-leveraging in the private sector and fiscal austerity caused by increased taxes and lowered government spending. An austerity fiscal cliff would put the U.S. economy into a recession.
Normally we would expect politicians, as adults, would be able to work out some comprise. However, Democrats and Republicans seem to have to different belief systems or worldviews. Republicans largely believe free enterprise is the best path to prosperity. The traditional Christian worldview states that individual rights come from a creator, and the purpose of government and law is the protection of these inalienable human rights, whereas Marxism and secular humanism believes “justice” requires the enforcement of strict equality, and redresses the exploitation of the entrepreneur class against the working class.
Republican Speaker of the House, John Boehner, has offered increases in revenue, but has asked for off-setting cuts in spending and entitlement reform. The Obama administration has a different worldview based upon Keynesian economics, which believes the government has all the answers. In Keynesian economics, government intervention can increase a slowing economy, and jump start an economy in stagnation. Government can stabilize banks through guarantees, bailout inefficient companies, and bring deserved prosperity to the working class.
With Keynesian socialism, the government replaces God, and attempts to plan the economy without using free market prices. However, according to Austrian economists, Ludwig von Mises, “socialism can never work, because it is an economic system that makes economic calculation impossible.“
If the U.S. goes off the fiscal cliff on December 31, and goes through a prolonged fight over an increase in the debt ceiling, the U.S. will go into a recession in early 2013. If a compromise is worked out, and the Federal Reserve prints money, the current bubble can be kicked down the road, until inflation and a spike in commodities culminates eventually in the boom busting. According to the Austrian school of economics, government intervention is unsustainable, and eventually results in the busting of a boom bubble.
For more information on the economy, and the current cultural war of worldviews, go to:
Tea Party Culture War.com