Establishment Screams: Avoid Fiscal Cliff and Borrow, Borrow, Borrow!

All of official Washington and their media lapdogs are shaking in fear of the so-called “fiscal cliff” that is looming January 1, counseling that the economy needs to continue its wild trillion-dollar deficit spending habits into the indefinite future.

The possibility that the federal deficit might not be as large next year has the establishment frightened, especially Federal Reserve Chairman Ben Bernanke. “The realization of all of the automatic tax increases and spending cuts that make up the fiscal cliff, absent offsetting changes, would pose a substantial threat to the recovery — indeed, by the reckoning of the Congressional Budget Office (CBO) and that of many outside observers, a fiscal shock of that size would send the economy toppling back into recession,” Bernanketold the New York Economic Club November 20. He instead urged Congress to avoid fiscal reality, even as he acknowledged that “the federal budget is on an unsustainable path.”

Of greater importance is continuing deficit spending and currency inflation, which will somehow magically cure the economy and deficit, according to Bernanke: “Preventing a sudden and severe contraction in fiscal policy early next year will support the transition of the economy back to full employment; a stronger economy will in turn reduce the deficit and contribute to achieving long-term fiscal sustainability.” Of course, this is the same prescription Bernanke has advised since becoming Fed chairman in 2006, with less than spectacular results. Read more...