Even a Short Plunge Off Fiscal Cliff Will Hurt
It's foolish to shrug off the dangers: Neil Irwin
By John Johnson, Newser Staff
Posted Nov 13, 2012 1:06 PM CST
It's probably going to hurt, no matter how short the fall.   (Shutterstock)

(Newser) – It's widely accepted at this point that a protracted fall over the fiscal cliff will send the country plunging back into recession. But what if, as is far more likely, lawmakers blow the deadline by just a few weeks? Conventional wisdom suggests it wouldn't be so bad, that the economy could endure the short-term pain. But don't count on it, writes Neil Irwin at the Wonkblog of the Washington Post. It's not enough to crunch specific numbers, you have to factor in the larger psychological effect.

"Markets don’t like risk," he writes. "And for the world’s largest economy to adopt a yo-yo approach to fiscal policy—steep tax increases and spending cuts one month, a reversal the next—would be an extra layer of risk for already jittery markets." The stock market would likely fall, while businesses and households retrench. Maybe the business cycle could bounce back quickly after a few weeks, but "losing this gamble would be very costly to everybody," says JP Morgan's chief economist. Read the full post here.

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Showing 3 of 13 comments
ren1999
Nov 20, 2012 6:15 PM CST
I think I'm going to call The Republican's, Ben Bernanke's, the elite's and the media's bluff on this "fiscal cliff" nonsense. "Oh no! Don't make us pay any taxes or we won't be able to hire and start new business. Oh no! Ohhhhhhh nooooo!" Yeah, well tell that to Hostess CEO Greg Rayburn and many members of his executive staff who paid themselves a 300% raise before filing bankruptcy and blaming it all on the union. Thieves! They all need to be investigated. The American employee was thrown over the cliff awhile ago. And it is time to stop this greedy corruption.
MSCOTTASHLEY
Nov 14, 2012 8:00 PM CST
Since when does the expiration of tax cuts amount to a "fiscal cliff"? This is more "let's scare the masses so we can manipulate them." If it were true that the 1% would create more jobs if they had a tax cut they would have already done it. The present tax cuts have been in place for 11 years.
flin1
Nov 13, 2012 4:10 PM CST
I always think it's funny when they say things like, 'the markets don't like risk' or 'businesses need certainty'. Well hell, I don't like risk and like certainty too. Maybe the dimwit businessmen should freakin' deal with it. Babies.