Monday, December 31, 2012
A Spanish View of the Looming 'Fiscal Cliff' Crisis (Crises)
Barnard R. Thompson
El Mundo, the important
news daily in Spain, ran an interesting report on December 30 by its Washington, D.C., correspondent Pablo Pardo. With
the headline "Manual in order to understand the 'fiscal cliff' that threatens the USA and Europe," it lists
a series of fiscal cliff related questions which the correspondent then answers.
The piece was noticed by yours truly thanks to a link posted on Twitter by Liebano Saenz, an insightful political
analyst with a distinguished past public sector career in Mexico, who today heads a public opinion research firm. In
his Tweet, Saenz made one editing change in the headline noted above -- in place of "Europe" he substituted "World."
The following is the lead to the "Manual," and a couple of its questions and answers
to give readers a sense of the piece. For the entire articule go to "Manual para entender el 'abismo fiscal' que amenaza a EEUU
y Europa," El Mundo, Dec. 30, 2012.
"Are these Americans crazy? What is the fiscal cliff? What do you mean 'automatic
spending cuts'? Is it that they have programmed the economy? Why did they do it? And how is it possible,
with a deficit of 7.3% of GDP, that nothing happens to them while in Europe that means no debt repurchase....?
"Here are some ideas in order to explore this fiscal cliff that can sink the
U.S., Europe and the world into a new crisis (in the case of Europe, let's say that it would only worsen our crisis, if
that comforts anyone).
"What is the fiscal cliff?
"It is a cut in public spending and an increase in taxes that take effect on January
1. The term 'fiscal cliff' was created by Federal Reserve Chairman Ben Bernanke, during an appearance before
"And in Spain, why does it matter to us?
"If the U.S. falls into the abyss, eurozone growth could be reduced from between
0.5% to 1 percentage point in 2013. That, in the case of Spain, would mean that 2013 would be even worse than 2012."
The commentary continues, listing
an additional dozen or so questions with answers and/or opinion responses. And after outlining a number of the issues
and problems, and what has been taking place in Washington, D.C., it poses concluding questions.
"And is this going to do any good?
This is all political theater. The problem of USA public finances is medium term, which is within 10-15 years.
That is because the public pensions system and public-private healthcare for the elderly were designed in the 1960s, when
5% of the population of that country was retired. Today it has reached 20%, and it continues to rise. And almost
nothing from the fiscal cliff affects that dynamic.
"Who is going
to notice the cliff first?
"If you are Spanish, you should already
know the answer. The longtime unemployed will lose their subsidy, employees will see their withholdings rise 2 percentage
points, and doctors who treat the elderly will see the money given to them by the government to treat the elderly reduced
"What will be the solution?
"Chances are there will not be a solution until the markets (exert) sufficient pressure."
"Manual para entender el 'abismo fiscal' que amenaza a EEUU
y Europa," El Mundo, Dec. 30, 2012; edited translation