The Fiscal Cliff

"The Fiscal Cliff" is what the New York Times calls what we usually call the union of Taxmageddon and Sequestration. However, it happens that the NYT is in favor of both higher taxes and massive cuts to defense programs (although it largely wants to see that spending redirected into "investments," i.e., other kinds of government spending). So where are we on this, in their reading?

Until recently, the loudest warnings about the economy have come from policy makers and economists, along with military industry executives who rely heavily on the Pentagon’s largess and who would be hurt by the government reductions.

But more diversified companies like Hubbell Inc. in Shelton, Conn., have begun to hunker down as well.

Hubbell, a maker of electrical products, has canceled several million dollars’ worth of equipment orders and delayed long-planned factory upgrades in the last few months, said Timothy H. Powers, the company’s chief executive. It has also held off hiring workers for about 100 positions that would otherwise have been filled, he said.

“The fiscal cliff is the primary driver of uncertainty, and a person in my position is going to make a decision to postpone hiring and investments,” Mr. Powers said. “We can see it in our order patterns, and customers are delaying. We don’t have to get to the edge of the cliff before the damage is done.”

So if we don't solve the problem, we get a renewed recession; if we do 'solve the problem,' it means increased deficits because we can only 'solve' it by agreeing to smaller tax cuts and redirected spending.

Seems like I've heard this story before.