I’ve been saying since October that it was in the best interest of our country for this Fiscal Cliff thing to happen.  No compromises, no back room deals, no voting present, etc.  Just let it happen.

I’ll show how going over the Fiscal Cliff is not only the lesser of all the other evils that can come out of these negotiations but how toggling this option will give the best chance to insure we have enough Conservatives in Congress to pick up the pieces once the inevitable collapse happens.

But first, let’s review what it will mean to go over the Fiscal Cliff.

What Is It?

Both CNN Money and The Heritage Foundation have great summaries of the Fiscal Cliff and I’ll use pieces of those articles to give you an overview.  Many may not know this but the This Fiscal Cliff was a bill passed by Congress and signed by Obama in August of 2011 and is called the Budget Control Act.

Here is what will happen if we go over the cliff.

1)      Tax Increases across the board:

“Seven different categories of tax policy expire on January 1, causing a $494 billion tax increase in just one year. This is uncharted territory: Never has there been such a steep tax increase in a single year.”

“Most of this massive tax increase stems from the expiration of the 2001 and 2003 tax cuts implemented under President George W. Bush. There is also the payroll tax cut, the alternative minimum tax patch, and a host of other policies that expire at year’s end. In addition, five of the 18 tax increases built into Obamacare are scheduled to go into effect. Families will bear the brunt of this tax increase among American households, with an average increase of over $4,100 in taxes.”

And there are more tax increases:

Income tax rates: Rise to 15%, 28%, 31%, 36% and 39.6%, up from 10%, 15%, 25%, 28%, 33% and 35%.

Capital gains rate: Rises to 20% from 15% for most filers.

Qualified dividend rate: Rises to one’s top income tax rate, up from 15% for most filers.

Child tax credit: Falls to $500 per child from $1,000. The refundable portion also reduced.

American Opportunity Tax Credit: Expires. The lesser value HOPE tax credit for college tuition is reinstated. Several smaller education tax benefits also expire.

Earned Income Tax Credit: Expansion of eligibility for the credit expires.

Marriage penalty relief: Expires. Effectively that means a low- or middle-income two-earner couple will owe more to the IRS than they would if they were single making the same income.

Estate tax: Parameters revert to pre-2001 levels. The exemption level falls to $1 million from $5 million; and the top tax rate on taxable estates rises to 55%, up from 35%.

Well, that will suck but you know what?  The pain needs to be shared by all of the US for voting for the same regime that caused this pitiful recovery, our credit downgrade and our debt to surpass our GDP.  Tough times will be on the horizon for sure but sometimes you need to be taught a lesson the hard way.

2)      Sequestration:

“The Budget Control Act of 2011 (BCA), a product of last summer’s debt-ceiling deal, increased the debt limit by $2.1 trillion in exchange for spending cuts. The BCA first established caps on discretionary spending to accomplish $900 billion in savings over 10 years and then tasked a “super committee” with finding at least $1.2 trillion more in savings. The super committee’s failure to reach agreement triggered sequestration—automatic budget cuts—totaling $1.2 trillion (including interest savings) over nine years. Sequestration cuts begin on January 2, 2013.”

“The Department of Defense would bear the greatest burden—49.5 percent of total cuts in 2013—even though it accounts for only 16.8 percent of total spending. About $55 billion of those cuts will hit in January 2013.”

But non-Defense spending will be cut by the same amount:

“$55 billion will be cut from projected levels of nondefense spending, which includes things like education, food inspections and air travel safety. Budget experts estimate the cuts will result in at least an 8% cut to programs, projects and activities.”

It sucks that we have to cut the Defense Budget in these uncertain times but if that means we cut the rest of the Federal budget across the board then so be it.  If this is the only way we can get spending cuts then we should take it.

3)      The Doc Fix:

“Medicare is set for another crisis point come December 31, when Congress’s latest “doc fix” agreement expires. As part of the Balanced Budget Act of 1997, Congress adopted the Sustainable Growth Rate (SGR) formula to pay doctors for treating Medicare patients. The SGR’s formula led Congress to choose between paying doctors less and patching together short-term fixes to keep reimbursing doctors.”

“Unless Congress patches together another doc fix agreement before December 31, physicians will see a 27 percent decrease in pay, a situation that will make it unaffordable for many doctors to continue accepting Medicare patients. This could leave millions of seniors without care.”

Medicare needs to be reformed and our representatives in Washington have resisted the adult conversations required to reform this out of control entitlement program.  This sounds harsh but maybe after we have our citizens unable to obtain proper medical care due to doctors exiting the Medicare program we’ll have the motivation to have these talks.

4)      Unemployment Benefits Reduced:

“The federal extension expires. That means workers who lose their jobs after July 1, 2012, will only receive up to 26 weeks in state unemployment benefits, down from as many as 99 weeks in state and federal benefits that had been available until recently. “

“By one estimate, more than 2 million claimants will lose their benefits by January.”

Extended Unemployment benefits have caused the Unemployment rate to remain high as more people opted for government handouts as opposed to taking a sub optimal job and once we go over the Fiscal Cliff, those people will be forced to find jobs.

In Summary, going over the Fiscal Cliff will involve tax increases for almost every American and budget cuts that will also affect most Americans.  It’s going to be painful and will most certainly plunge us into another Recession if not a Depression.  There will be tough times ahead for all of us for sure if we go over the Fiscal Cliff but it is what we must do.

Why We Should Go Over It

There are only three scenarios that can play out in these negotiations and all of them are bad for our country so I’m advocating the one that will do the most to convince Americans that Team Obama and his Keynesian ways are destructive for our country and (this is key) will leave enough Republicans in Congress to pick up the pieces and lead us to a true recovery.

The “Give Obama Everything he wants” scenario states that the Republicans in the House and Senate should give up this battle in an attempt to win the war.  They will vote ‘present’ for any Obama proposal and then watch the country fall into a Greece style austerity nightmare and Depression.  While I like this option and even suggested something similar in 2011 when Obama proposed his Jobs Bill, this scenario would be political suicide for many Conservative Congressmen who were elected to be the fire wall for these Leftist policies.  Many seats in the House and Senate might be lost to Democrats (or RINOS) and there would be nothing to stop the total destruction of the United States in the coming years.

Obama has made it clear that raising tax rates on the wealthy must be a component of the Fiscal Cliff negotiations so another scenario to avoid the Fiscal Cliff calls for Republicans giving in to this Obama demand.  Again, we could take the approach to try and spin this as giving Obama what he wants and then blaming all bad economic data on him but the water carrying media wouldn’t allow that.  Any further stagnation in economic growth will be blamed on Republicans for not doing enough to raise tax revenue on the wealthy and making the rich pay their “fair share.”  Even though it is obvious that the wealthy already pay more than their fair share, the 2012 elections showed that the American public isn’t interested in math and data.  They’ll believe the never ending campaign memes of Team Obama and still blame those Republicans and their Capitalism loving ways.

As with the 1^st scenario, this 2^nd option would cause many Conservatives in Congress to lose their seat because they failed to follow through on their pledge to reduce taxes and cut spending.  We’d lose too many seats in Congress if Republicans bowed to Obama’s concessions and there would be nobody left to bring us back from the brink once the Depression hit.

So the only other option is to go over the Fiscal Cliff.  True, Obama and the obliging 4^th Estate will still find a way to blame Republicans but this is going to happen no matter what.  It’s up to us and our Conservative leaders to remind the American public that the Fiscal Cliff, aka Budget Control Act, was approved by BOTH parties in Congress and signed by Obama.  It meets Obama’s requirements of a bi-partisan, balanced approach so he has nothing to complain about.  This is what Obama wants and we should remind the American people of this fact.

Going over the Fiscal Cliff will at least allow Conservatives in Congress political cover in coming elections since they performed their role as a firewall by taking the least destructive option on the Fiscal Cliff.

The use of Government scare tactics to get more of our hard earned money in the name of ‘preventing a catastrophe’ is not new.  Even in recent history we have TARP/2009 Stimulus and now, before we’ve even settled the Fiscal Cliff, we have a new cliff called the Dairy Cliff.

Yes, It’s cliffs all the way down.  All the way down to Greece.

We passed the point of painless solutions years ago.  It will have to get a whole lot worse before it gets better so resign yourself to that fact and make preparations.

Let. It. Burn.