Fiscal Cliff, Schmiscal Cliff

Includes: SPY
by: Dana Blankenhorn

When I see friends like James Kostohryz wringing their hands over the "fiscal cliff" I have to smile.

The fiscal cliff isn't the problem. It is, in fact, the solution to the problem of deficits. It's deficit reduction. Spend less, raise more. It was approved by a Congress that couldn't come up with any other way forward. Everyone's favorite programs and tax breaks would go on the pyre, and if we didn't find another way forward by a date certain we're gonna light this thing, like the magician swallowing gasoline and then lighting a match.

It's an opportunity.

And while Republicans are screaming that they won't take any tax increases, and that we must throw Grandma from the Medicare train to keep it from running off the tracks, I say bushwah.

It's true. Because Europe remains tied to Simpson-Bowles-ism, strangling Greece so hard the birthplace of democracy is turning to the neo-Nazi Golden Dawn movement for succor, refusing to understand that if bad loans are made it's the people who made the bad loans who eventually have to take the hit, that you can't draw blood from a stone (or not much anyway), that growth and productivity are the only ways to repay anything, we can't afford to go the same route all at once. We need to do this thing, but we need to do it gradually, increasing austerity as growth rises, keeping most of it at bay while growth remains fragile.

Which means the only point at issue should be what we take off the pyre.

That's why Republicans are screaming "fiscal cliff." They want their stuff taken off the pyre. They want their tax cuts, and they want their military spending. They want their priorities respected, and never mind that those priorities were thumped by the voters last week, "fiscal cliff, fiscal cliff, fiscal cliff!"

It's funny. It's laugh-out-loud funny.

Fact is, there are offers the President can make that won't hurt anyone. Thanks to the rise of Accountable Care Organizations, or ACOs, and best practices in hospitals, spurred by the Affordable Care Act, medical care inflation is now abating, even while the number of old folks is rising. That's going to continue.

An ACO is an economic model in which doctors get paid a fixed amount per-patient to keep patients well, rather than just deal with sickness. It does this for less than the old fee-for-service model could, and leaves healthier people too. Best practices, based on comparative effectiveness research, tell doctors to do the obvious things first, relying on data rather than gut instinct. Linking the income of insurance to the outgo of providing care creates incentives for efficiency.

It's sad for doctors who lose much of their autonomy, who find themselves with salaries instead of LLCs, but it's great for patients. And it means we can budget less for the military's TriCare program, and for Medicaid, and for Medicare, in the years to come than we otherwise would.

Social Security is financially sound, but people are living longer. A gradual increase in the retirement age to 67 would guarantee that soundness through our kids' retirement, and frankly I like my job - I want to stay here.

The President can offer that, but demand Clinton-era tax rates, and some military cuts. We may also, finally, get to some discussion of paying for those two wars George W. Bush and a Democratic Congress put on the credit card a decade ago. That's what's running up the debt and, in the glow of welcoming our troops home, asking how we'll sacrifice for their hard work is appropriate.

But "fiscal cliff, fiscal cliff, fiscal cliff?" Please. The whole intent here was to use the pressure of a deadline to force compromise on the means and pace of austerity. It's a good thing, not a bad thing. As to stocks and the economy, I'm bullish.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.