Cliffs, Valleys, and Flash Floods

Every now and then I get annoyed that the opposition to freedom has control over the national vocabulary. So I’m striking back a little bit with my own small force. What I’d like to do away with is “fiscal cliff.” The term implies that, at a certain point (and this time it’s at the end of the year when the Bush tax cuts expire and everybody’s taxes then suddenly rise to previous rates), there will be financial freefall. It’s looking like a game of chicken.

I want to change the metaphor to something closer to what is about to happen.

Back in late 2008 we went off a cliff—we had the sudden drop of a severe recession. What do you expect after a recession fall? That’s right—a bounce back up to where we were. Under normal circumstances, when the economy hits bottom, it heads back up with about the same amount of energy, sometimes climbing higher than previously. Unless, of course, there’s interference “to help.” I wrote about this in “Parabolas” and “The Trampoline Effect.”

Winter Camp Slot, Near Moab, UT
photo from here

Government interference took away the bounce back up. The trampoline metaphor would look like jumping off a cliff onto a bouncy trampoline floor that would just as robustly put us back up where we had been. But the “help” meant someone stopped the bounce from happening, and we found ourselves pretty much stuck down there on the valley floor. Nothing for it but to walk along the cliff wall until we can find a path with enough possible foot and hand holds to allow us to climb back up.

So we’ve been walking along the valley floor, kind of wandering, for four years. Sometimes the floor of the valley has been heading very slightly up, so we’ve tried to follow that direction, moving along this valley as we go.

But now what is about to happen—the sudden across-the-board tax increases—is we get stuck in a tighter canyon; we’re running out of valley floor to walk on, and the cliff we’re inexorably approaching is even more sheer and imposing than the one we dropped down originally. Can it be climbed out? Maybe, with the right  equipment, some skill, and a lot of determination. As Westley said, while climbing the Cliffs of Insanity in The Princess Bride, “Look, I don’t mean to be rude, but this is not as easy as it looks. So I’d appreciate it if you wouldn’t distract me.”

Private sector business is the climber; the distractors, a combination of Democrats, liberals, media (redundant, I know) are pointing out that they’re waiting to kill the climber when he reaches the top, which “does put a damper on the relationship.”

[We could also see the distractors in this climbing scene between Vizzini and the Fezzik the giant:

Vizzini: You were supposed to be this colossus. You were this great, legendary thing….

Fezzik: Well, I’m carrying three people….

Vizzini: I do not accept excuses. I’m just going to have to find myself a new giant, that’s all.

There are so many ways we can apply The Princes Bride to our world.]

It’s a precarious situation we’re in. What’s even worse is that climbing the economic canyon wall, while necessary and difficult, is made more treacherous by an additional looming danger. We hear distant thunder. That means rain, which, in this terrain, means FLASH FLOOD. If there is enough “rain”—quantitative easing, or printing of money that is not backed by wealth created, as well as debt along with mounting interest, now at higher rates because of our twice-lowered credit rating—then we get hyperinflation. We get washed away down the economic canyon.

Flash floods in this terrain are much more dangerous than in, say, a flatter plain, or more gentle slopes. The tight canyon walls direct the path of the flood and speed it up. Everything in the narrow canyon gets washed away. Occasionally there are survivors [the link is a news story about the 2004 Antelope Canyon flash flood and its one survivor; not about economics, but a fascinating story], but deaths are common. In our analogy, the deaths are business closings and more lost jobs.

Is this for certain going to happen? We don’t know. We just know the conditions to watch for, and we see them. Darkening clouds loom above. Thunder rumbles not too distant. We’re up against the cliff wall, struggling against great odds to get to higher ground.

So, in not-very-cheerful summary: the expiration of Bush tax cuts (which, after a decade simply translate as a sudden tax increase) are a huge sheer wall in the way of recovery. But the real fear isn’t a sudden new drop, or recession; we’re already there on the valley floor, so we’re not about to step off a ledge. What we have to fear is the flash flood of hyperinflation, washing us down, down, down the ravine, with plenty of inevitable drownings.

Congress shouldn’t be overly concerned about the looming cliff wall. Dithering about whether we’re going to walk into the wall isn’t the least bit useful. Better would be to put out warnings: get to higher ground. Now! Save yourselves! Government can’t do anything useful at this point but get out of our way.

In a related mistranslation: tax increase does not equal revenue. I wrote about the Laffer Curve here. This video, from Prager University, is one of the better explanations.