Wait for the Splat. (We actually fell off the cliff) by Oliver DeMille

Published: Sat, 01/05/13

"Empowering Ordinary Citizens to Make an Extraordinary Difference"

Wait for the Splat.

We actually fell off the fiscal cliff.

(and how a bigger fiscal cliff is coming in February 2013)

The raising of taxes is just beginning. The Fiscal Cliff agreement in Congress passed because the Obama Administration has mastered the technique of splitting the Republican Party through the use of crisis.

Here's how it works.

"Governance via Crisis"

First, the Administration looks for a crisis or helps create one.

Second, it sits back and waits until the very last minute. This is important because the air of crisis creates support for votes that increase spending in the Administration's proposals.

Third, the Administration mixes some good things that really are needed to avert the crisis right along with increased spending schemes of various sorts.

Since time is short and a crisis is imminent, the media tends to couch the situation in three ways:

"If Republicans vote against this, they'll be responsible for making the crisis worse."
"If Republicans make it worse, we'll probably see a stock market crash and a double-dip recession."
"The proposal isn't perfect, but in this crisis it is necessary--and Republicans can vote for spending cuts later."

The Obama team used this same scheme in the Debt Ceiling negotiations in 2011, the Government Shut-Down crisis of April 2011, and the Fiscal Cliff debates in 2012/2013.

In all three cases, many Republicans felt the pressure of crisis and voted with the Democrats, thus bringing President Obama his victories. He's three-for-three when he uses this technique.

In the Fiscal Cliff situation, Republican "cooperation" brought almost no spending cuts and added nearly $4 trillion to the $15.5 trillion national debt.

Note that when President Obama came into office, the debt was under $10 trillion.

Under his watch, it increased 54% in the first three years, and with the costs of the Fiscal Cliff agreement added it is now just under $20 trillion.

It will grow much more when Obamacare gets fully implemented. Plus, the payroll taxes just went up.

New to the Poli-Sci Lexicon

As I wrote in an earlier article, we are now a Spendocracy rather than a Republic, and our political decisions are based more on Crisisocracy than Democracy.

But this growth of government spending is just beginning--if the Obama team gets its way. The Administration will likely use this same crisis technique again in the Debt Ceiling debates of February 2013. After all, this technique is extremely effective.

The only way to overcome this is for Republicans in the House of Representatives to simply vote against such proposals.

Just say no.

Let the crisis come. Let at least one of these crises come. Call the President's bluff.

This isn't an extreme or populist view. It's actually the moderate, balanced approach.

Think about it. If Republicans had refused to give into this tactic in 2011 and just let the government shut down for a few days, it wouldn't have come up in the debt ceiling debate.

If they had allowed the debt ceiling to be raised later in 2011, the Obama team wouldn't have dared try this method on the Fiscal Cliff.

If Republicans had stood firm and voted down the Fiscal Cliff deal, the White House could not use this type of negotiation in the February 2013 debt ceiling debate.

"But we would have drastically hurt the economy," the critics respond.

This is exactly wrong.

It's correct in the short term, but in the long term the opposite is actually true.

Let's be clear: If Republicans vote down the Obama proposal in one of these big crises, it will certainly have a negative short-term impact on the economy.

But the negatives aren't nearly as big as those caused by voting for these proposals and continuing to increase our federal spending, national debts and government deficits.

No Extra Credit

Specifically, world credit agencies are watching, and every time we refuse to stop spending and instead cave in and keep increasing our debts, our credit rating is weakened.

If we keep on this path, further downgrades are inevitable. In fact, the day after the Fiscal Cliff law passed Congress, Moody's said that since the law increased the deficit, a further downgrade of U.S. credit is likely.

Moody's also said that the Fiscal Cliff law will cost America over 600,000 jobs.

The same thing applies to the U.S. Dollar as the world's reserve currency. Many nations (led by China and supported by several leading European countries) are currently pushing to end the dollar's status as the global reserve currency, and the Fiscal Cliff vote greatly weakened America's credibility in this issue.

The importance of this is hard to overstate.

Remember that when Great Britain lost their benefit of holding the world's reserve currency in the 1970s, the net worth of most British citizens decreased more than 25-30 percent.

No matter how badly the economy might respond to going off the fiscal cliff, closing the government, or not raising the debt ceiling, it would not approach anything near 25%.

A further credit downgrade or loss of the reserve currency status would be much, much worse than just letting one of these minor crises happen.

That's what many people don't quite understand, and what House Republicans need to clarify.

Take Your Medicine

America needs the House Republicans and Democrats to tell the Obama Administration that we'd rather face a recession now than a depression in the coming years.

We need the House to take a stand, to demand spending cuts or shut down the non-essential portions of government until the Senate and President cave in, to negotiate from a position of strength.

A recession is painful. But getting out of it typically takes 1-2 years. A depression, in contrast, takes 5-15 years to overcome--and the pain is much deeper and more widespread.

If we continue to increase spending in Washington and raise taxes on business creators, more capital and jobs will continue to leave the United States and we will move even closer to a depression.

This is precisely why depressions happen, because nations find it difficult to make hard decisions when the stakes are high, and as a result they don't do the hard things that would fix the economy--until it is too late.

If Republicans fail once again to stop the spending during the Debt Ceiling vote this February, the economy is poised for major downturns.

Make no mistake. Whatever the pundits say, we fell off the fiscal cliff on January 1, 2012.

Until House Republicans stand up and simply say "no" to the Obama super-spending agenda, the Spendocracy will grow and a depression is looming. Indeed, conspiracy theories aside, those who want government to grow are actually benefited by recession and depression because they gain even more demand for increased government involvement.

Follow the Money

When governments increase spending and regulation on a struggling economy, downturn follows.

In economic recessions, central governments grow. In depressions, they triple or even quadruple in size.

In short, depressions are a big-spender's dream, so don't expect the White House or Senate to do very much to stop our current financial problems.

Right now our only chance to head off a real crisis is for a lot more courageous "no" votes by members of the House.

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