CBO figures for the 2012 fiscal year just ended show cash basis spending of $3.54 trillion, revenues of $2.45 trillion, and a one-year cash deficit of $1.09 trillion. Proposed tax increases on high earners promise to bring in maybe a tenth of that, less than $100 billion per year, at some potential loss to future growth. Other pre-scheduled tax increases in the fiscal cliff (i.e., restoring 1990s tax rates on the middle class and letting the AMT hit several million more people) are things no one believes will actually happen. Just perhaps, it is time to consider cutting spending. Say, by around $1 trillion per year.
The so-called "fiscal cliff" comes with about $100 billion of pre-arranged spending cuts. That's less than 3% of annual Federal spending, and only about a tenth of what it would take to approach cash basis budget balance, even while continuing to ignore the ongoing problem of entitlement acceleration. But $100 billion in cuts would be a start. In my opinion any large organization that tries can cut 3% of its spending in a way that nobody will really notice. Needless to say, the prospect of these minimal cuts is throwing the Federal bureaucracy and its allies in the press into spasms in their efforts to defend every last dollar of spending.
To the defenders of spending, the main question is whether these insignificant 3% cuts should be characterized as "devastating," "drastic," or "draconian." A google search of "fiscal cliff devastating cuts" returns 30 million hits, an example being this from the White House (via CNN Money) in September: "The White House budget office, in a report mandated by Congress, said the cuts "would have a devastating impact on important defense and nondefense programs." A similar search for "fiscal cliff drastic cuts" returns 1.45 million hits. Example (from the Council on Foreign Relations): "Democrats [are] pushing for more revenue as part of any deal to avert the drastic mandatory cuts." Draconian is running a distant third, with only 223,000 hits in response to "fiscal cliff draconian cuts"; but you have to save a word like "draconian" for special situations, as in this from the mayor of Providence, Rhode Island at the Huffington Post: "The fiscal cliff would have profound and draconian consequences for the City of Providence."
How to turn 3% cuts into "devastating," "drastic," and "draconian"? The answer is the "Washington Monument strategy," by which the bureaucracy, instead of doing its job and finding ways to minimize the impact of the cuts, instead maneuvers to maximize the impact and visibility of the cuts ("We'll have to close the Washington Monument!"), in order to build up public pressure to avoid them. For example, this from Mayor Taveras of Providence: "Here in Providence, these cuts would hit hardest our most vulnerable citizens: children in low-income households, senior citizens, individuals in need of substance abuse counseling." Actually the cuts wouldn't hit any of these things at all if Providence stopped wasting its money on outrageous pensions for its public workers and instead used its own money to provide the services to "our most vulnerable citizens." Or here we have USA Today reporting on threats from FAA and TSA of cutbacks in air travel if the cuts are allowed to proceed. "FAA could be forced to close more than 100 smaller airports. . . . TSA could lay off thousands of baggage screeners. . . ." Those services were provided privately until just a few years ago. Now that they are Federally provided, they are the perfect way to threaten to inconvenience the public to get support for other spending the public doesn't even know about.
Readers of this blog do not need to be reminded that the Federal government cut its level of spending by 50% twice in the twentieth century -- first in 1921, and then in 1946-47 (in the demobilization from World War II). Both times the economy took off into a prolonged boom. Time to do it again.