If the fiscal cliff occurs, I don't think the Federal Reserve has the tools to offset that event.
Sentiment: NEGATIVE
Now, 'the fiscal cliff' is a name that the media came up with, but some of us have been saying for years, 'You have got to stop the out of control federal spending, or you will end up at this point.' We're there.
You have to separate what needs to be done to avoid the fiscal cliff and what needs to be done longer range. It's a mistake to essentially collapse those two - they're not the same. I don't think you can achieve everything at once.
Even people on the liberal side are starting to worry about going off a fiscal cliff.
Cold-turkey deficit reduction would cause a significant recession. A recent analysis by the Congressional Budget Office estimated that going headlong over the cliff would cause our gross domestic product, which has been growing at an annual rate of around 2 percent, to fall at a rate of 2.9 percent in the first half of 2013.
I am specifically concerned about the idea that the legislative process is one that gets characterized the way it is as the 'fiscal cliff.' At the end of the day, the United States is the biggest economy in the world, and the dollar is the reserve currency in the world. I think it behooves us to act in a much more responsible way.
It is understandable that the Fed injects cash to avoid the collapse of the stock market, but basically it is bad policy for monetary authorities to intervene to save speculators from bankruptcy. This is not their role.
And so we go over the cliff fiscally, and our Republican friends try to pin the blame on discretionary domestic spending, including spending for security. We pass budget resolutions that fall far short.
But the debt limit obviously is something that needs to and will be passed. That is not inconsistent with a process and a belief that we have to get significant deficit reduction.
When you're the president of the United States and you know that the biggest issue facing you is this cliff that we're about ready to head over if we don't get this spending and debt situation under control, it's very irresponsible not to take the action that is necessary to fix the problem.
The 'fiscal cliff' is a ruse, an invention by the right and the rich, to try and keep their huge tax breaks.