Mike Kueber's Blog

January 2, 2013

FiveThirtyEight weighs-in on the Fiscal Cliff compromise

Filed under: Issues,Media,People,Politics — Mike Kueber @ 9:30 pm
Tags: , , ,

FiveThirtyEight by Nate Silver is one of the most popular political blogs in America.  (Its name is taken from the number of presidential electors.)  San Antonio’s Mayor Julian Castro has declared it to be his favorite, and I agree.  It is not only interesting, but also credible, as proven by its detailed predictions about last year’s presidential election. 

Today’s posting of FiveThirtyEight in the NY Times provides an excellent framework for evaluating the Fiscal Cliff compromise.  According to Silver, the compromise can be evaluated from three perspectives:

  1. How much does it redistribute income?  Although Silver is a liberal, he is not running for office, and this allows him the freedom to admit that part of the liberal agenda is to redistribute income from the rich to the poor.  Clearly, from this perspective the compromise was a great success because most of the new taxes were imposed on America’s high earners and only a bit of it (expiration of temporary FICA cuts) was imposed on low earners.
  2. What is the ratio of tax increases to spending cuts?  Republican presidential candidates were ridiculed in the media for arguing that they would reject $9 in spending cuts if the cost was $1 in tax increases.  I wonder if the media will now ridicule the balance in this compromise with $40 of tax increases for every $1 of spending cuts.
  3. How much stimulus spending is included?  From this perspective, the compromise is more balanced.  The extension of unemployment benefits and a few business tax credits will provide some stimulus, but those will likely be outweighed by taxes on the rich and the FICA tax on almost everyone.

Prior to the compromise, several pundits (mostly conservative) warned that President Obama might drive too hard of a bargain and that this will come back to haunt him.  I am “modestly optimistic” (to use one of Obama’s malaprops) that those pundits were correct and that Americans will now rise up and insist on significant spending cuts as part of the Debt Ceiling compromise.

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