Cliff Schmiff

8 Pages Posted: 16 Aug 2012

Date Written: August 16, 2012

Abstract

Dread of the “fiscal cliff,” widely apparent in public discourse on tax and fiscal policy, rests largely on an illusion: that the contractionary effect of unwinding public debt can be substantially avoided if it is carried out more gradually. In fact, the possibility of fiscal drag inheres in all reduction of public debt. The question is whether it can be mitigated by stepping away from the fiscal cliff and following some other path to public solvency.

While a less painful resolution of our fiscal situation may be possible in theory, the policies floated of late in public pronouncements across the ideological spectrum are more harmful over time than simply falling off the cliff.

Keywords: fiscal cliff, fiscal policy, public debt, government debt

Suggested Citation

Isenbergh, Joseph, Cliff Schmiff (August 16, 2012). University of Chicago Institute for Law & Economics Olin Research Paper No. 611. Available at SSRN: https://ssrn.com/abstract=2130795 or http://dx.doi.org/10.2139/ssrn.2130795

Joseph Isenbergh (Contact Author)

University of Chicago Law School ( email )

1111 E. 60th St.
Chicago, IL 60637
United States

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