By James Kwak
“We write today to urge you to work together to reach a bipartisan agreement to avoid the approaching ‘fiscal cliff,’ and take concrete steps to restore the United States’ long-term fiscal footing.”
“But merely avoiding the fiscal cliff is not enough. We further urge you and your colleagues to enact legislation that truly restores the nation’s long-term fiscal soundness.”
It’s too obvious to waste more than a sentence spelling out what’s wrong here, so here it is: “Going over” the “fiscal cliff” is the single best thing we could do to “restore the United States’ long-term fiscal footing.” The CEOs of every big bank (who signed the letter) must know that. Right?
There are valid arguments against going over the fiscal cliff, but the national debt is not one of them. Going over the cliff would do more to address the long-term debt than anything any politician has proposed. And, as Yglesias points out, “If you care about inequality, jumping off the cliff offers by far the best chance for addressing it,” since it is the only plausible way to significantly increase taxes on the wealthy.