In today’s Nature there is an article about the impact on science in the USA of the fiscal cliff. The conclusion is a bit startling.
- The US deficit is out of control. Spending is orders of magnitude greater than revenue. The government is something like 24% of GDP.
- The ‘Fiscal Cliff’ solves the problem by getting about 80% of the revenue from increased taxes, and 20% from reduced spending. Apparently the Pentagon is a big part of US Government spending, and it will be hit particularly hard. (Can you say, F-35?)
- Science will be scaled back, something like 8%. Not ideal, but doable.
- Basic social programs like medicare and medicaid are protected from funding cuts.
- Net Net: the fiscal cliff is a set of laws enacted because they could not agree what to do. What the fiscal cliff does is, fixes the deficit while refusing to do it on the backs of the poor or the middle class. This was perceived as a last-ditch disastrous way to fix the deficit.
It should be noted that personal income taxes in other countries are much higher than in the United States. The entitled 0.1% are lobbying their buns off to stay entitled.
Paul Krugman, the economist, said in the Nature article that going over the cliff might be the best solution. There is a risk of triggering a recession, but the impact of government spending on the economy is not well understood. Estimates range from, per dollar of government spending, to economic impact, of from .5 to 1.9. Nobody really knows how these things correlate.
Now for the dumb question.
We’ve been hearing a chicken-little sort of chorus that the sky is falling, especially if tax cuts for the rich expire. Who do you suppose is behind all this display of hand-wringing? The 99%? Perhaps not, eh?