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Will We Fly Off the Cliff on January 1?

December 3, 2012, 12:28 PM

As our leaders in Washington, D.C., hurtle closer and closer to the fiscal precipice, it’s worth reminding ourselves of how a friendly game of “chicken” can end. This is what happened to a British schoolgirl last week:

A 13-year-old girl died after being hit by a tram while allegedly playing a game of “chicken” with her friends. Lindsey Marie Inger was flung 15ft into the air when struck by the 50-ton tram after dashing in front of it. The schoolgirl was rushed to hospital but was later pronounced dead. The tram driver and Lindsey’s friends were treated for shock at the scene in Bulwell, Nottingham.

And lest you forget the fate of Buzz in “Rebel Without a Cause,” have a look:

Is this the New Year’s Day present Americans can look forward to?

In a post at the Economist today, I criticize our leaders in Washington for playing an irresponsible game of chicken with the American economy. I also report what seems to be the conventional wisdom that legislators will strike a deal early in 2013 to avoid the worst consequences of sudden budget cuts and tax increases. We will likely “go off the cliff” on January 1, but a parachute will open up to break our free fall before we suffer a crash landing. It will be like waking up from a nightmare right before the train hits.

So we can expect this fuzzy feeling of on-your-toes anxiety to last  and to intensify  in the coming weeks, and we might see reduced Christmas spending as a result. The contours of each side’s interests makes a deal unlikely before the holidays. For some Democrats, who prefer the softer metaphors of a “fiscal slope” or a “fiscal curb,” the prospects of ending the year without a deal aren't terribly dramatic. And if tax rates return to Clinton-era levels at the beginning of the year, both Democrats and Republicans will get to pass tax cuts in the new year even if the savings do not extend  as they should not to the top two percent of earners. It’s all a question of baselines.

But serious risks to the American economy remain, and there is plenty of daredevil machismo coming from party leaders on both sides: House Speaker John Boehner and Treasury Secretary Timothy Geitner sounded like “Rebel Without a Cause” rivals Buzz and Jim on the Sunday talk shows. Let’s hope for a softer landing.

Follow Steven Mazie on Twitter: @stevenmazie



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