Friday, December 28, 2012

Fiscal Geography

Every other pundit and blog writer has tapped out an opinion on the taxation and spending conundrum facing Congress and the White House.  I find myself compelled to participate although I am going to avoid some of the worst jibes such as the “looming fiscal cliff” referenced by The Brookings Institute. After all, mountains “loom” on the horizon.  While a cliff, assuming we are going to fall over it, would simply “yawn” or “gape” before us.  If the “cliff” is “looming” ahead, it suggests we are at the base of some large, abruptly rising element  -  like higher taxes perhaps.  Geographically speaking, the bungee jumping reference is probably more in step with Ben Bernanke’s thinking when he first coined the phrase and warned Congress of potentially negative economic growth and job loss that would come with reduced spending.

Perhaps now we know why the Greeks were so riled up over austerity measures imposed upon them over the past few years.  They needed no geographic metaphors to understand that balancing the public budget is a painful experience.  Unfortunately, they have had no choice.  Their creditors had pulled the plug on new credit.  The United States has not come to that point just yet as foreign investors – read China  -  have been consistently willing to buy up U.S. treasury bonds.

So we have some time  -  time to stall a bit longer on reducing spending, time to delay paying more taxes.  We can indulge in bad puns.  What is more, investors also have the luxury of ignoring the protracted political game in Washington DC through the holiday.  The only geography investors need concern themselves with this week-end is the local sledding hill or the nearby ski lift.

Happy New Year!


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