The media in the past few weeks has been in a frenzy over the fiscal cliff. We have been bombarded with commentators telling us that the Washington will avert the cliff because they can’t afford not to.
These commentators wax poetic about Tip and Ronnie cutting a deal, and how that is how Washington is supposed to work. Firstly, if Tip and Ronnie had cut a deal that was worth a damn we would not be in this mess. The more important point though is that we are going to go over the cliff because every political group in Washington benefits from doing so.
Liberals— Liberals as a group are not terribly worried about deficits. They do worry about the deficit being used as a pretext to cut social programs, which it almost always is. Going over the cliff give them a lot of breathing room.
Moderates— Most of the moderates left in D.C. are Clinton Democrats who are extreme deficit hawks. The Clinton Administration raised taxes and left the country with a budget surplus. While they may worry about the political implications of taxes going up, they will be far more relieved that the deficit has gone down.
Conservatives— Tax cutting has become the mantra of the Republican party, but right now revenues as so low that the next Republican president could not cut taxes without the bond market spontaneously combusting. Going over the cliff gives them room to move on taxes in the future. Ask Mitt Romney tax cuts are way sexier than revenue neutral tax reform. No Republican could vote for a tax increase and get renominated anyway, so this is a good out for them.
Tea Party— The Tea Party has been saying since their creation that Obama has raised taxes. The reality is that revenues under Obama have hit post WWII lows. Going over the fiscal cliff makes their lies true, and give them a real issues to rally behind; not that they have need a real issue to rally behind before.