The closed-door negotiations over taxes and spending known as the “fiscal cliff” are doomed to fail even if they succeed. The reason: both sides are relying on their own false premise on how to narrow the massive imbalance between the revenues of the federal government and what it plans to spend over the next 10 years.
The false premise championed by President Barack Obama and his fellow Democrats is higher tax rates on “the rich” are the key to fiscal balance.
False premises are dangerous because they lead to bad policies. In the case of negotiating tax increases and spending cuts, the real world results at best will do little to move the federal fisc toward balance. At worst they risk recession and a devastating increase in the deficits of federal, state and local governments to say nothing of family budgets.
There is truth in both premises. More revenues are needed if the federal government is to deliver on its many promises, from its commitment to future senior citizens to providing for a strong defense. And, Social Security and Medicare would both benefit from reforms that would reduce cost but in a way that provided a better product to their respective beneficiaries.