Wilberne Persaud, Financial Gleaner Columnist
It was United States Federal Reserve Chairman Ben Bernanke who coined the well-known and previously for some, entirely hair-raising term, 'fiscal cliff'.
It referred to the combination of spending cuts and tax increases set to come into force beginning January 2013 if the US Congress failed to reach a decision on remedial action. The Bush tax cuts would have expired and significant spending cuts - including the Pentagon budget - would ensue.
The impact on spending would not have been immediate as they would not all kick in at once. Tax cuts however, would have evaporated for all including the middle class, immediately.
Views differed on the impact this would have on the US economy - hence global economic conditions.
Some on the left in the Democratic Party saw it as a major triumph, a battle won without a fight. This was no cliff, it was a curb or at best, a slope Democrats should be happy to negotiate.
Ending the Bush tax cuts for the wealthy - a key element of President Obama's election platform, would fall into their laps. At the same time Republicans would own the blame for again placing the economy in jeopardy, for playing fast and loose with the livelihood of a majority of Americans, particularly those unemployed through an event not of their own making: the September 2008 meltdown, the 'made in Wall Street' great recession.
Fed Chairman Bernanke in public statements continued to warn against approaching the cliff face: "I don't buy the idea that a short-term descent off the fiscal cliff would not be costly ... I think it would be costly and in fact, we're already seeing costs."
He cited falling levels of consumer and business confidence, stock market volatility and anaemic business investment as actual casualties of the looming fiscal cliff. The impact according to Bernanke was not a futuristic thing. Business moves in tandem with expectations; behaviour had already been influenced and he was therefore hoping "Congress will do the right thing on the fiscal cliff. There's a problem with kicking the can down the road".
As it happens, in a tribute to brinkmanship, a deal raising taxes on incomes of US$400,000 and US$450,000 for individual and joint filings respectively, went to the House floor less than 24 hours after passage in the Senate.
It was approved by 257 votes to 167. Some 172 Democrats found support from 85 Republicans who, for the first time in two decades agreed to increase income taxes. The 'no' votes cast were 151 Republicans and 16 Democrats.
Recall, the Bush tax cuts were unfunded as were the wars in Iraq and Afghanistan. And while Republicans over the years always cry wolf at deficits, once they take the reins of government, deficits explode.
The fact is Republicans had to do a reckoning with political reality. Tea Party extremists whom some consider to be living in their own alternative reality, vowing to destroy Barack Obama's presidency, finally realised their actions have become transparent to a majority of the US electorate - even much of the 47 per cent who voted for Mitt Romney in last year's presidential election.
Could one call this group 'revolutionary conservatives' bent on taking society back 100 years or perhaps to the nineteenth century?
Or are they simply bigoted chauvinists and racists fuelled by ignorance, funded by murky billionaire figures such as casino magnate Sheldon Adelson?
Surely they're not a conservativemovement as we know it. Their extremism must have shaken Bob Dole out of his wheelchair upon his visit to Congress as he was forced to witness his party vote down a bill to provide equality of treatment for disabled people worldwide. The grounds for this negative - the US should never submit to UN pressure. In fact it was a US-enacted law being ported to the rest of the world that would allow disabled US citizens to expect equal treatment wherever they chose to visit.
President Obama, home from his interrupted holiday in Hawaii to deal with the fiscal cliff, expressed regret that the deal wasn't a comprehensive and balanced mix of enhanced tax revenues and spending cuts, saying, the "one thing that I think hopefully the New Year will focus on is seeing if we can put a package like this together with a little bit less drama, a little less brinkmanship and not scare the heck out of folks quite as much". But he continued by issuing a warning to Republicans against using the upcoming vote on raising the national debt ceiling to advance their mantra of spending cuts inimical to a majority of Americans.
He clarified his position on the debt ceiling this way: "While I will negotiate over many things, I will not have another debate with this Congress over whether or not they should pay the bills they've already racked up through the laws they have passed. Let me repeat: We can't not pay bills that we've already incurred."
The last time a debt-ceiling vote came up Republicans held the US economy to ransom, resulting in a downgrade in its credit rating. A debt-ceiling increase is a routine matter. It has never been a partisan issue - as Obama says, these are "bills they've already racked up through the laws they have passed!"
This brings us to the moral of this story. A dysfunctional Republican party whose behaviour in last year's debt-ceiling crisis one of my correspondents describes as treasonous is bad for America. It is also, given globalisation and climate change among other things, bad for the world.
Political reality and an election have finally won a major turnaround from a decidedly destructive path. Simplifying this outcome is the fact that there was a straightforward reversion to a previously known state.
Whither Jamaica? We have no Bustamante or Manley tax cuts that we might allow to expire. We have a debilitating inequality fuelled by a tax base that woefully under-represents income levels of the society's taxable base.
Unlike Republicans neither party openly goes out to bat for this base. Yet it remains as a visibly conspicuous free rider. The unvarnished truth is: Jamaica's fiscal deficit cannot be fixed without change to this situation. GCT can take us no further and default is a winding and tortuous route as events in New York's courts remind us about Argentina.
Sorry this outlook may be hazy if not dark, nevertheless, a happy New Year to my readers. Here's hoping conditions emerge in 2013 that allow for those resolutions to take root.
Wilberne Persaud is an economist engaged in work on impacts on Caribbean SMEs and startup enterprise. email@example.com