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Sunday, December 9, 2012

‘Cliff’ not the fatal flaw

Tony Paradiso

The other day, I had lunch with a fellow Telegraph columnist Scott Flegal. As many conversations between small business owners do these days, our discussion quickly turned to the “fiscal cliff.” We didn’t necessarily agree on how the affair would – or should – play out, but we did concur on one thing: Washington has become a black hole for integrity and common sense. Even those who go to Washington with either integrity or common sense quickly have it sucked into the abyss.

We also agreed that the problem isn’t running massive deficits, or entitlement programs that promise more than they can deliver, or even that unemployment is too high. These are merely symptoms of the problem which is Washington itself. ...

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The other day, I had lunch with a fellow Telegraph columnist Scott Flegal. As many conversations between small business owners do these days, our discussion quickly turned to the “fiscal cliff.” We didn’t necessarily agree on how the affair would – or should – play out, but we did concur on one thing: Washington has become a black hole for integrity and common sense. Even those who go to Washington with either integrity or common sense quickly have it sucked into the abyss.

We also agreed that the problem isn’t running massive deficits, or entitlement programs that promise more than they can deliver, or even that unemployment is too high. These are merely symptoms of the problem which is Washington itself.

Both political parties are dysfunctional and the process has been usurped by big money. I’m no student of history, but having recently seen the movie “Lincoln,” it seems such ways are nothing new to Washington.

I suspect historians would confirm that the political system’s flaws are as old as man. That view is usually sufficient to dissuade good people from demanding real change. Why bother, it’s always been this way, and we’ve managed to succeed.

That is a compelling argument except for one thing: it’s true until it isn’t. And history is strewn with example after example of empires that succumbed to that argument’s fatal flaw.

That flaw is best summed up by the concept of death by a thousand cuts. Notwithstanding those that suffered devastating military defeats, empires don’t fail in a blaze. They fail slowly, almost imperceptibly to each generation, until they pass the point of no return. The conundrum is that it’s impossible to know when that point of no return is reached.

The other flaw with the “it’s always been this way” philosophy is that we don’t operate in a vacuum. When you’re top dog, there are always others who want what you have. And they tend to be more motivated and focused. And some are shrewd enough to develop strategies that take advantage of a competitor’s flaws.

The moral of the story is simple: our generation may get away with maintaining the status quo. Even the next generation might dodge the bullet. But whether it’s our children or our children’s children, someone will eventually pay for our complacency.

But, I digress. Scott asked me if I had seen Fred Teeboom’s letter to the editor (“A refreshing plunge over the fiscal cliff”) published Dec. 5. I don’t know Mr. Teeboom, but I subsequently read his letter, and it made me think. Perhaps going off the cliff wouldn’t be the worst result. Sure, we’d suffer some short-term pain, and probably a mild recession, but in the end, it might be the quickest road to an eventual economic recovery.

The British strategy of austerity offers a model for the approach. I doubt that the average Brit is all too happy about it, but if they manage to muddle through, they will return to true economic prosperity sooner than those who choose to whittle away at the problem. The question is, though, will they tolerate the short-term misery? Or will the political pain be so intense as to cause leadership to seek a dose of economic morphine?

Regardless, short of a sensible political solution that achieves a balance between tax increases and real spending cuts, going off the cliff might be the best course. Besides, what’s the chance of getting a sensible political solution? It’s about as good as the Red Sox winning the World Series next year. It could happen, but it isn’t likely.

Here’s my last word on the fiscal cliff. An agreement will be reached. Not because Washington will come to its collective senses, but because the Republicans have lost the battle of public opinion. The president is holding all the cards.

If the Republicans stand firm, they will suffer the consequences – not Mr. Obama. And those consequences could result in losing their majority in the House. That is a price they can ill afford to pay. So the Republicans will accept higher taxes on the wealthy. They also will accept fewer spending cuts than they would like, and those cuts will happen further into the future than they should. And nothing will be done to address the entitlement programs or substantially reform the tax code.

While the odds are even money that the president will get some sort of stimulus, my guess is that he won’t. Finally, Congress will not cede its power to oversee the debt ceiling. Then again, I doubt that the president expected to win that one. I suspect he only asked so he’d have a concession in his pocket that he cared little about giving up. Will the scenario I just painted be a better solution than going off the cliff? In my opinion no. The sooner we get a handle on the debt, the better because that point of no return is fast approaching.

My great fear is that the disarray in the Republican Party will render it impotent to check this president’s desire to spend. And more spending will accomplish little beyond adding to the thousand cuts that are sapping our economic strength.

Author, professor, entrepreneur, radio and TV commentator Tony Paradiso can be reached at
tparadiso@tds.net.