The “fiscal cliff” talks offer a chance to rebalance the American economy so that the long years of living beyond our means — spending too much and raising too little, paid for by borrowing from the Chinese – will be brought to an end in an orderly fashion. As we have seen from the pitched battle between the White House and the Republican House leadership, finding the right balance between tax increases and spending cuts is not easy.
If free-market economists were serious about their ideas, they would surely be arguing vociferously right now for the economy to plunge over the fiscal cliff. But where are the laissez-faire economists lining up to urge John Boehner to lead his Tea Party tribe in the House to veto all compromise and put our money where their mouths are? They are strangely silent. Instead, the debate is about how Keynesian we should be.