The so-called fiscal cliff is one installment in a series of manufactured crises, the purpose of which is to provide the political establishment with small problems it can solve or pretend to solve while steadfastly refusing to address the much thornier problem of the long-term non-sustainability of U.S. public finances. Watching the melodrama unfold, I sometimes think I should be reviewing it in my theater column over at The New Criterion rather than analyzing it for National Review.
The fundamental unseriousness of the fiscal-cliff debate can be appreciated by examining the Corker plan (as my colleague Dan Foster does here), which probably is very close to the best that deficit hawks could hope for in terms of a bipartisan compromise — which is to say, precious little. At best, the Corker plan would reduce the growth of U.S. federal debt by about $4.5 trillion over the next decade, but it would not eliminate the deficit or reduce the debt, and it would allow for trillions of dollars to be added to the wrong side of the national ledger.
The Democrats give every indication of being interested in using fiscal-cliff hysteria to achieve nothing but a modest, almost symbolic increase in federal income-tax rates for taxpayers earning $250,000 or more, which would do very little to reduce the deficit but would confer a measure of emotional satisfaction on the Left. A fair number of small-business owners, managers, and professionals would see their taxes go up, but the actual rich — the Wall Street types, CEOs, Silicon Valley princelings, etc. — would continue to have the bulk of their income taxed at the lower capital-gains rate. That rate will go up (from 15 percent to 20 percent) absent a fiscal-cliff deal, but the hedge-funders and such still will be paying a rate about half the top income-tax rate. President Obama wants that tax increase to happen, but only for taxpayers earning $250,000 or more.