Dancing on the edge of the fiscal cliff

The tea-party right was willing to risk the hard stop in spending that would have resulted from running up against the debt limit—a game of chicken that neither the Democrats nor the sane fraction of the Republicans could take the risk of losing.

The fiscal cliff looks a little similar, but it’s much less dangerous. It’s a game that lends itself to playing through to the end, because the risk of losing isn’t nearly so bad.

Suppose we did go over the fiscal cliff. What would happen?

First, tax rates would go up for everybody. That’s bad, but it’s not terrible. Actually, taxes at those rates would produce revenue roughly equal to the amount of government people seem to want.

Second, spending would be cut, with the cuts falling on almost everything except Social Security. A lot of good stuff would be cut, but that might not be such a stiff price to pay, considering that a lot of the things that ought to be cut (such as defense spending far beyond our needs) would otherwise be very hard to cut.

The result would be a rough year or two, hard on everybody from working-class folks to defense contractors, but all those problems would be fixable. In fact, Congress would love to fix those problems! Congress could cut taxes! (Just not as much as Bush did.) Congress could boost spending! (Just not to current levels.) Really, there’s nothing congressmen like better than cutting taxes and spending money on stuff.

The other details are similar. The AMT would strike middle-class folks hard, but that could be fixed, too. In fact, having to fix it would be an opportunity to improve it—turn it back into what it was supposed to be, a minimum tax rate that applies to everyone, no matter how many tax shelters they have or how many special preferences they qualify for. The end of the “doc fix” would hurt health care providers, but that could be pretty easily fixed too. (We’ll no doubt have to make a lot of small changes to healthcare stuff, once health care reform goes into effect and we run into the inevitable glitches.)

It’s always hard to raise taxes and cut spending, so it’s hard to do what needs to be done. But that’s why the fiscal cliff is so perfect. Once we go over the edge, we won’t need to raise taxes and cut spending—we’ll need to cut taxes and raise spending, and that’s dead easy.

Dive over the fiscal cliff, then fix things. It’s not perfect, but it wouldn’t be nearly as bad as what we’ve got now.

What do taxing districts do?

The town of Savoy, just south of Champaign, makes a point of having lower taxes. They do so by not providing many of the amenities that Champaign and Urbana provide—no bus service, no public library, etc. Residents, since they can be free riders on Champaign and Urbana services, like the situation just fine.

A few years back, the Champaign-Urbana Mass Transit District was looking to expand its service area into Savoy. Property owners in Savoy didn’t like that idea.

There are rules allowing taxing districts to annex adjacent areas and begin providing services—and assessing the tax. The rules make it pretty tough for an area to opt out; just about the only way is to already be in the taxing district of another service provider. With that in mind, Savoy created its own mass transit district a few years ago (the Champaign Southwest Mass Transit District). The idea was that it wouldn’t provide any mass transit service and wouldn’t levy any tax.

All very sad, of course, for anyone like me who uses the bus service, along with anyone who thinks that public services are a good idea. Which meant there was a bit of schadenfreude when, as anyone with any sense had foreseen, Savoy’s transit district promptly levied a small tax (to pay the legal cost of fighting CUMTD’s attempt to annex areas within the district anyway). Taxing districts levy taxes. It’s what they do.

Now we’re getting a bit more schadenfreude: People within Savoy’s transit district (the new YMCA and an apartment complex) are asking the district to provide transit services.

It’s funny, but it’s also kind of sad. I mean, the people who built the apartment complex and the YMCA surely knew that they were building in a place where there was no transit service. I’m sure they picked those locations because the land was cheap. Didn’t they stop to think that the reason the land was cheap was because of the lack of services?

On the one hand, I’m glad to see the Savoy transit district getting pressured to provide transit services. Providing transit services are what transit districts are supposed to do. And I have no sympathy for the residents who created the district in the hopes of dodging a tax—only a moron creates a taxing district while expecting not to be taxed.

But I’m still kind of sad. If transit service to the YMCA is important (and the YMCA says the lack of it is their visitor’s number one complaint), wouldn’t it have made more sense to build the new YMCA within the CUMTD service area? Instead, they build where they know there’s no service, and then complain about it: More sprawl and more bickering.

Of course, those are just more reasons why the Champaign Southwest Mass Transit District was a bad idea. I mean, really! Who’s so stupid as to create a taxing district hoping not to be taxed?