The economy is going to fly over the edge and crash.
At Econbrowser, there is a post that points to all sorts of reasons... why we need to increase taxes:
The Fiscal Cliff, and the Enduring Legacy of EGTRRA/JGTRRA and a Certain Discretionary Spending Measure Starting in 2003
If spending is out of control... we must increase taxes. Of course, it is probably best if that happens only to those make more than $250,000. Nary a word about reducing spending. That's not prudent. We'll just wait until the taxes outstrip the spending and everything will work out because we will be able to save the difference for a "rainy day."
Peter Schiff, who has been pretty much correct about the problems of the last decade or so, writes:
In reality, the economy will encounter extremely dangerous terrain whether or not Congress figures out a way to wriggle out of the 2013 budgetary straightjacket. The debt burden that the United Stated will face when interest rates rise presents a much larger "fiscal cliff." Unfortunately, no one is talking about that one.
The current national debt is about $16 trillion (this is just the funded portion...the unfunded liabilities of the Treasury are much, much larger). The only reason the United States is able to service this staggering level of debt is that the currently low interest rate on government debt (now below 2 per cent) keeps debt service payments to a relatively manageable $300 billion per year.
On the current trajectory the national debt will likely hit $20 trillion in a few years. If by that time interest rates were to return to some semblance of historic normalcy, say 5 per cent, interest payments on the debt would then run $1 trillion per year. This sum could represent almost 40 per cent of total federal revenues in 2012! [full article]Well, yes, if we can't pay for our spending now, we can't pay for it if the cost of money increases.
So are we doomed? There's an old saying that if you do what you always did, you'll get what you always got. Yes, if we continue to do what we are doing we will take that proverbial plunge over the cliff.
Some while ago, I wrote this: