"Give that Man Some Fiscal Cliff!" I worry sometimes. Sometimes a lot. I’ve been living in and outside the States for some years and one time as I was leaving, back in 2010, I knew for sure that upon looking back at my beloved country – our United States of America, within a short period (I don’t know, months?) I’d be witness to the buckling and ultimate collapse of the American behemoth. The leviathan that America had become was groaning under the stress of its own unsupportable fiscal weight and was about to give way. I fully expected to be watching, in awed disbelief, as the United States succumbed to greater financial forces and had to face a fiscal reckoning of its own making. I’ve always been fascinated by finance and economics (for me, it was finance instead of sports) and as the last couple years have unfolded, astonishingly, not only did the United States not collapse, I happened upon a whole new way of looking at economies and how macro-fiscal matters really unfold.
I used to believe economics was science - borne of great minds, like Keynes, Hayek, von Mises. Through quantification, calculation and forward analysis, though from different economic schools of thought, they predicted probable outcomes based on their own particular certainties. Using historical modeling as reference and for proof to support their forward projections, they captured the imagination of a larger population of thinkers. Given their disparate philosophies of how economies work great debates ensued and they continue to this day. Each side, right vs. left, continually outdoes the other with proofs and ‘precise outcomes’ that favor their worldview as events unfold.
"Show Me the Fiscal Cliff" I’ve reached a new conclusion though. Economics is more political and social than it is reliant upon numbers and hard math. The math is the final arbiter. It brings us to the end of the story, but the real intrigue, the part that matters, because it is what we live, is the drama that is played out before economies and civilizations rise and fall. It is always a story that is long and deep and nuanced and highly unpredictable.
The math of economics assumes rational, predictive behavior. However, the social aspect of economics mandates that, even if governments act in the greater interest, there are both winners and losers. In the United States, our social construct and our democracy relies upon the consent of the governed. Those who are governed must participate in our democracy, by voting, in order for it to ‘work’. As long as we the governed are in agreement that we are active in a participatory democracy, then we support events and outcomes as they unfold. After all, we have been ‘instrumental’ in bringing these things about.
The answer to the fiscal problems the United States faces, in reality, are insurmountable. They cannot be solved. The math says so. The amount of debt the United States has accrued and the monetary steps necessary to remedy that are impossible to implement to any meaningful degree. It’s a complicated problem of unfathomable proportions that is politically inexpedient and, therefore, virtually impossible to address. The average American cannot get his head around, much less embrace, the necessary reduction in entitlements and increase in taxes that would be necessary to actually fix our upside down American economy.
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