"Fiscal Cliff" is a Terrible Metaphor
Posted at 10:15 a.m. on Nov. 13, 2012
FT Alphaville explains why calling the year-end mix of spending cuts and tax increases a “fiscal cliff” is actually very misleading.
“If policymakers don’t work out a solution by January 1st, the harm is not immediate. Nor is it irreversible, nor is it even all that perilous at first. And even to describe the various components as a single item is problematic: each would have a different effect on the economy.”
The Financial Times has some data: “The Congressional Budget Office puts the full cost of going over the cliff at almost 3 percentage points of output and 3.4m jobs by the end of 2013… Those figures, however, describe the cost of going over the fiscal cliff and staying there for a whole year… Going off the cliff for a couple of weeks might mean a loss of as little as 0.1 per cent of output.”
Meanwhile, Wonkblog has taken to dumping the name altogether and aptly calling it an “austerity crisis.”