The fiscal cliff
On Wednesday morning, after months of focusing on the electoral horserace, Americans awoke to find themselves in a perilous position; we had been sleeping at the edge of the fiscal cliff. But how did we get here?
The metaphor of a fiscal cliff – meaning an anticipated event which will have dire economic consequences unless an intervention is made – has been in use for decades in the United States. In 1987, for instance, it was used to describe the finances of an electrical utility facing bankruptcy:
Public Service Co. of New Hampshire, majority owner of the Seabrook nuclear power plant, inched closer to the edge of a fiscal cliff by defaulting on $37 million in debt interest payments.
– Boston Globe 18 Oct., 1987
By the 1990s, this figure of speech had come into favor in political circles. Democratic Representative Henry Waxman of California used it in expressing his opposition to a Medicaid waiver requested by the state of Oregon, saying “the state is about to fall off the fiscal cliff” (Christian Science Monitor 20 Sept., 1991). Until last year, however, the “fiscal cliff” was simply a rhetorical flourish without a fixed meaning.
Debt ceiling cliff-hanger
In the past year, the “fiscal cliff” has taken on a very specific sense, referring to the economic changes that will automatically take place on January 1, 2013 unless Congress is able to agree to stop them. These include $1.2 trillion in automatic spending cuts in the federal budget (imposed as part of a deal to raise the federal debt ceiling last August), the end of a payroll tax holiday, and the expiration of the income tax cuts instituted by George W. Bush, all of which are expected to imperil the fragile recovery of the US economy.
After the deal to raise the debt ceiling was passed last year, Senator Rand Paul of Kentucky wrote that “the current deal to raise the debt ceiling doesn’t stop us from going over the fiscal cliff. At best, it slows us from going over it at 80 m.p.h. to going over it at 60 m.p.h.” (New York Times 3 Aug., 2011). This may be the first example of the metaphorical cliff being applied to the present scenario, but it doesn’t specifically refer to the 2013 deadline. We seem to owe the current prominence of the “fiscal cliff” in its specific sense to Federal Reserve Chairman Ben Bernanke, who warned on 29 February 2012:
On January 1, 2013, there’s going to be a massive fiscal cliff of large spending cuts and tax increases. I hope that Congress will look at that and figure out ways to achieve the same long-run fiscal improvement without having it all happen at one date.
– All Things Considered radio transcript
Since Bernanke spoke those words, the use of fiscal cliff to refer to our present circumstances has proliferated exponentially, shifting the sense of the phrase decidedly from a general metaphor to a specific, and fast-approaching, event.