The expression "fiscal cliff" has been so prevalent in the headlines these days that it has now become part of the American lexicon. It is a metaphor made popular by Ben Bernanke, Chairman of the Federal Reserve at the beginning of this year, to describe "the automatic tax increases and spending cuts due to take effect on 1 January".
But why a cliff? Because some economists believe it would send the U.S. (and the world) into recession.
The Congressional Budget Office estimates the economy would contract in 2013 by 0.5% and unemployment would rise to 9.1%. (CBO)
It is clearly a very dramatic metaphor which has a powerful grip on the imagination. A cliff implies a potential fall to your death. Thus it generates fear, hence its popular use in the media. With the January 1 deadline, it means there is great and immediate danger.
According to lexicographer Ben Zimmer (BBC News), the phrase "fiscal cliff" has been used in the past - probably as early as 1893, and definitely in the 1950s, and it may have gained in our modern era popularity because of the cliffhangers of Hollywood. It may also be that it taps into our basic understanding of the world and our way of conceptualizing the economy: Good Is Up / Bad Is Down, according to linguist George Lakoff. Clearly, even Wall Street seems to follow the basic assumption of this metaphor. (here)
For other economists, like Paul Krugman or Robert Reich, it is a misleading, if not dangerous metaphor (here). What will probably happen if no agreement is found is that taxes will go up so people take home less of their income, and Congress will have to find spending cuts.
"But nothing's going to change much in the first two weeks. It's more like a slope or a hill, if we're going with topographical metaphors." says Derek Thompson, business editor at The Atlantic. (BBC)
Besides the "Fiscal Slope", other metaphors have been suggested:
"Minor step off a curb", "Bad overhang", "A very tall mountain to climb" or a "Fiscal fast" (Huffington Post)
No metaphor is likely to accurately relate the complexity of the issue, but how you frame the issue remains crucial because as Thomson said: " it can generate a panicked deal instead of the right deal."
The main reason for the current gridlock is the pledge of many Republican party members not to increase taxes, even on the wealthiest. It is opposed by the Republican Party under the Tea Party's influence, and lobbyists such as Grover Norquist. (see here)
As we have said before on this blog, the Tea Party is a very interesting "bunch" (for lack of a better term since it is hardly a movement and certainly not unified) whose very name is metaphorical in nature and taps into the national founding myths: the Boston Tea Party agains British taxation of tea in her American colonies.
It may be hard for outsiders to see the connection with our present times (and that is because there isn't), but the Tea Party considers that the (moderate) 'welfare' state and the current government is a form of tyranny in part because of its taxation, juste like the British. Of course, they conveniently forget that the in the 18th century, the colonists complained of "taxation without representation", not quite true today. Congress may be ineffective but it's still a democratically elected body.
The Tea Party has mythologized its anti-government, anti-tax agenda into a definition of American identity. It has tapped into mythical symbols of the national history to turn a political agenda into a patriotic stance, thus making those who oppose them de facto un-patriotic.
But the Tea Party's use of myth should be understood in all sense of the word: their protest became visible in 2009, precisely at a time when Federal taxation was actually at its lowest in 30 years. (WP, ) and the same as it was in the 1950s.
Even total government tax revenue (federal, state, and local) was lower in 2010 than pretty much any time in the last 40 years.
And I'm not even talking about the unproven but often repeated assumption that high tax rates on rich people hurt the economy. (If anything, it seems history suggests otherwise - see here as well)
Just for comparison, the United States has one of the lowest tax revenue as share of GDP of all modern economies.
The paradox of anti-taxation rhetoric at a time when taxes are lower suggests a displacement from other unsaid angers to the government which becomes the easy anonymous target. Since the demography of Tea Partiers is mostly older white male, one may think this is just the wrong expression of a true sense of disempowerment by people who used to feel they had economic power - or at least symbolic power in the nation. As Ken Burns said it on Meet the Press the other day, the Tea Party's anger may have at least been partly fueled by the elections of a black president. Race is always an issue in the United States, even indirectly.
In any case, it is not the reality of taxation that makes sense but the symbolic value of the oppression perceived by those supporting the Tea Party's anger. It must also be added that a lot of the supporters may be genuine, but the "movement" is far from a simple grassroots spontaneous expression, as it has been portrayed. It has been funded by powerful industrialists such as the Koch Bothers to support their interests.
The American people have not been fooled, it seems. Most polls these days show that a majority of Americans support raising taxes for the wealthy (here). That's why this "fiscal cliff" battle is a game loser for the Republicans, and they know it. In end, they just need to find a way to save face as much as possible. Whether they choose to skydive, bungee jump, build a bridge, or a hard stop, they will need to do something to avoid cliff, if they don't want to be blamed for the consequences.