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.

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.



The End of Pregnancy

And the inevitable rise of the artificial womb.

Doctor Tests Positive for Ebola in New York City

How a Company You’ve Never Heard of Took Control of the Entire Porn Industry

The Hot New Strategy for Desperate Democrats

Blame China for everything.

The Questions That Michael Brown’s Autopsies Can’t Answer


Kiev Used to Be an Easygoing Place

Now it’s descending into madness.


Don’t Just Sit There

How to be more productive during your commute.

There Has Never Been a Comic Book Character Like John Constantine

Which Came First, the Word Chicken or the Word Egg?

  News & Politics
The World
Oct. 23 2014 1:51 PM Is This the ISIS Backlash We've Been Waiting For?
Oct. 23 2014 5:53 PM Amazon Investors Suddenly Bearish on Losing Money
Oct. 23 2014 5:08 PM Why Is an Obscure 1968 Documentary in the Opening Credits of Transparent?
  Double X
The XX Factor
Oct. 23 2014 11:33 AM Watch Little Princesses Curse for the Feminist Cause
  Slate Plus
Oct. 23 2014 11:28 AM Slate’s Working Podcast: Episode 2 Transcript Read what David Plotz asked Dr. Meri Kolbrener about her workday.
Brow Beat
Oct. 23 2014 6:55 PM A Goodfellas Actor Sued The Simpsons for Stealing His Likeness. Does He Have a Case?
Oct. 23 2014 11:45 AM The United States of Reddit  How social media is redrawing our borders. 
  Health & Science
Oct. 23 2014 5:42 PM Seriously, Evolution: WTF? Why I love the most awkward, absurd, hacked-together species.
Sports Nut
Oct. 20 2014 5:09 PM Keepaway, on Three. Ready—Break! On his record-breaking touchdown pass, Peyton Manning couldn’t even leave the celebration to chance.