The CBO concludes that "such a contraction in output in the first half of 2013 would probably be judged to be a recession."
Second question: If deficit reduction is supposed to be good for the economy, why is the deficit-reducing fiscal cliff so bad?
Over a Barrel
So what happens if nothing is done and, like somebody riding Niagara Falls in a barrel, we go over the "cliff"?
First, taxes go up -- for everybody. Even the lower tax brackets would be affected, and the struggling middle class would feel the pinch.
On the spending side, the fiscal restraint deal mandates a number of cuts to non-war-related defense spending. (Quick show of hands: Does anybody really believe that Congress won't pass a law increasing defense spending anyway, or that Democrats won't back it and the President won't sign it? Didn't think so. Me neither.)
There will two percent cuts in Medicare provider payments, which will reduce the number of providers who accept Medicare. That will lead in turn to problems with access to medical care for people with Medicare coverage. Other programs that will be cut include farm prices; other affected programs include student loans, vocational rehabilitation, mineral leasing payments, the Social Services Block Grant, and dozens of smaller programs.
Here are the programs that won't be cut because they've specifically been exempted (thanks to Democrats for at least winning these exemptions): Social Security, Medicaid, the Children's Health Insurance Program (CHIP), SNAP (food stamps), child nutrition, Supplemental Security Income (SSI), the Child Tax Credit and the Earned Income Tax Credit, veterans' compensation and benefits, and federal retirement.
Third question: If Democrats replace a deal that doesn't cut Social Security and these other programs for one that does, why do they think people will celebrate?
The "Long Game" Game
This gets us to what's often called the "long game," that mythical vision of a grand and secret Democratic strategy in which doing a series of bad things will lead to a good outcome.
As the Obama team often does, it's running around these days reinforcing the economically misguided rhetoric of the right by boasting that the President has slowed growth more than his Republican and Democratic predecessors did. Take this chart, from the Facebook page of something called the "Obama Truth Team":
That's not something to brag about. Our GDP grew 8.27 percent by my estimation, while Obama increased government spending by only 1.4 percent. When Obama amplifies the anti-government, anti-spending rhetoric of the right, he makes it harder for those around him (and those who will follow him) to press for needed government spending. And he makes urgently-needed government spending much harder to win politically.
The same is true when Dick Gephardt co-authors an editorial with Denny Hastert urging cuts. Or when Sen. Max Baucus talks about his own efforts to craft an austerity deal with Republicans. Or when Bill Clinton attends a misguided "fiscal summit" and parrots the misleading statistics of the Simpson Bowles crowd.
Oh, but don't worry. We've been reassured that all of these Democrats are playing a "long game."
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