Fiscal Cliff Fearmongers Still Don't Know What The Fiscal Cliff Is

A blog about business and economics.
Dec. 19 2012 1:27 PM

Fiscal Cliff Fearmongers Still Don't Know What The Fiscal Cliff Is

The most frustrating thing about the "fiscal cliff"—a combination of tax increases and spending cuts that will rapidly reduce the US budget deficit—is the extent to which the people doing the most to ring the alarm bells about the need to "avoid" it don't seem to understand what it is. To wit, Cargill CEO Greg Page says if there's no deal international investors will lose confidence in the United States:

A failure to navigate the cliff could, he feels, be one of the types of events that starts to erode confidence in the country’s governance.
“People begin to doubt your institutions,” he said in an interview at Cargill’s Washington office. “If you take the name off and just look at the vital signs, you’d jump to all sorts of conclusions,” he said, referring to the country’s high debt and annual deficits.
Advertisement

Got that? Unless congress reaches an agreement to make the budget deficit bigger people will jump to all sorts of conclusions about our high debt and annual deficits. I don't get it.

It's also worth noting that the whole dynamic in terms of international investment flows doesn't work the way Page seems to think. A big company like Cargill wants the confidence of credit markets so it can borrow at low interest rates and make money. But if international investors lose interest in buying US government bonds, what will happen is the trade-weighted price of the dollar will fall boosting American-made exports and American-made import-competing goods. Since we currently have high unemployment and a fair amount of excess capacity, that drop in the dollar will boost growth, shrink the output gap, and lead to a smaller budget deficit.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

TODAY IN SLATE

Foreigners

More Than Scottish Pride

Scotland’s referendum isn’t about nationalism. It’s about a system that failed, and a new generation looking to take a chance on itself. 

What Charles Barkley Gets Wrong About Corporal Punishment and Black Culture

Why Greenland’s “Dark Snow” Should Worry You

Three Talented Actresses in Three Terrible New Shows

The Human Need to Find Connections in Everything

It’s the source of creativity and delusions. It can harm us more than it helps us.

Jurisprudence

Happy Constitution Day!

Too bad it’s almost certainly unconstitutional.

Is It Worth Paying Full Price for the iPhone 6 to Keep Your Unlimited Data Plan? We Crunch the Numbers.

My Father Was James Brown. I Watched Him Beat My Mother. Then I Married Someone Like Him.

  News & Politics
Weigel
Sept. 17 2014 12:02 PM Here It Is: The Flimsiest Campaign Attack Ad of 2014, Which Won't Stop Running
  Business
Moneybox
Sept. 17 2014 12:13 PM “For a While Liquidity Led to Stupidity”
  Life
The Eye
Sept. 17 2014 12:19 PM Early Cancer Hospitals Were Modeled on French Castles, Served Champagne
  Double X
The XX Factor
Sept. 15 2014 3:31 PM My Year As an Abortion Doula
  Slate Plus
Slate Fare
Sept. 17 2014 9:37 AM Is Slate Too Liberal?  A members-only open thread.
  Arts
Behold
Sept. 17 2014 11:06 AM Inside the Exclusive World of Members-Only Clubs
  Technology
Future Tense
Sept. 17 2014 11:14 AM How Does That Geometry Problem Make You Feel? Computer tutors that can read students’ emotions.
  Health & Science
Bad Astronomy
Sept. 17 2014 11:18 AM A Bridge Across the Sky
  Sports
Sports Nut
Sept. 15 2014 9:05 PM Giving Up on Goodell How the NFL lost the trust of its most loyal reporters.