Cliff-hanger: what will happen once we fall off the fiscal cliff? Not much, apparently

Could the fiscal cliff be the 2013 version of Y2K? The Huffington Post’s excellent Ryan Grim reports that this may indeed be the case. As you will no doubt recall, after a year of dire forecasts about how computer systems around the world would crash on January 1, 2000, the predicted apocalypse failed to materialize. Similarly, the much-hyped impact of the fiscal cliff is shaping up to be a big nothingburger.

As Grim writes, the fiscal cliff is “a combination of automatic tax hikes and spending cuts scheduled to go into effect Jan. 1.” But federal agencies have long been preparing for the possibility that no deal would be reached by then, and, says Grim, they are pretty much “planning to carry on as usual.”

For instance, the IRS has no plans to begin immediately withholding higher tax amounts from paychecks. Similarly, various government departments and agencies, like the Government Accounting Office and the Departments of Defense, Energy, and Health and Human Services have no plans for layoffs or cuts. The one group that is likely to suffer is workers who rely on federal unemployment insurance, which kicks in when state benefits expire after six months. But according to Grim, those workers “would be eligible for back benefits once a deal is cut.”

So all those Very Serious People who have been encouraging us to panic about this stuff . . . now that they see that the results of falling off the cliff won’t be catastrophic, they’ll calm down, right? I mean, there’s no point in needlessly freaking people out.

But wait, not so fast! What about . . . the invisible bond vigilantes?

Never fear! The Very Serious People are reporting sightings of them already:

“Wall Street has been way too sanguine about the fiscal cliff,” said independent political analyst Charlie Cook. “Sure, there will be a deal, but it could be next week. It could be February or March. The more exotic, meaning ideological extremes [on the left and right] are not yet ready to do what is necessary.”

Some things never change!

Kathleen Geier

Kathleen Geier is a writer and public policy researcher who lives in Chicago. She blogs at Inequality Matters. Find her on Twitter: @Kathy_Gee