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Fiscal Cliff -- Just Theatrics?

With the so-called 'fiscal cliff' looming, Matt Smith of CNN*Politics reported earlier this evening, "The fiscal cliff is nigh; Senate still talking, House won't vote." The lede of his story:

"The feared fiscal cliff was at hand Monday night, with nothing expected to pass Congress before a combination of tax increases and spending cuts starts to kick in at midnight.

"A deal to avert that combination, which economists warn could push the U.S. economy back into recession, was "within sight" on Monday afternoon, President Barack Obama said. And in the Senate, Minority Leader Mitch McConnell told members that they were "very, very close" to a deal, having worked out an agreement on taxes."

Two weeks ago, however, James Pethokoukis posted a chart (below) at AEIdeas, the blog of the American Enterprise Institute showing "why JPMorgan calls the fiscal cliff 'nothing but theatrics'. Pethokoukis explains the chart this way:

"Economist Michael Feroli of JPMorgan makes a great point in a new report about the fiscal cliff. Almost whatever the outcome, he points out, it will do little to nothing to change the nation’s lethal long-term budget trajectory. Focusing, as the current negotiations do, on a completely arbitrary ten-year budget window is a complete distraction. The national debt will still be rocketing higher."

In case the chart needs further clarification, Pethokoukis includes the following explanation in the economist's own words, which were (emphasis in the original):

"Thus, the ten-year horizon may bias policymakers toward policy options that do little to address the projected explosion in debt coming in fifteen years. We’ll continue to closely track the fiscal cliff theatrics, more because of how the outcome could affect near-term growth rather than the implications for long-run sustainability; the focus on the ten-year window almost guarantees that longer-run sustainability will not be attained in the current budget battle."

Speaking of theatrics and optics, why was it necessary for the President to have a "background of citizens" standing behind him during his speech about the status of the 'fiscal cliff' this afternoon (watch especially the first few seconds of the video in this ABC News story? Inquiring minds would like to know! Should one assume the 2012 presidential campaign hasn't ended?

UPDATE (12/31/12): The Washington Post's Lori Montgomery et al reported at 9:01 P.M. this evening that "Obama, Republicans reach deal on fiscal cliff; Senate vote expected tonight." Their lede:

"President Obama and Senate Republicans reached a sweeping deal late Monday that would let income taxes rise significantly for the first time in more than two decades, fulfilling Obama’s promise to raise taxes on the rich and averting the worst effects of the “fiscal cliff.”

"Vice President Biden arrived at the Capitol just after 9 p.m. to explain the details of the pact he negotiated with Senate Minority Leader Mitch McConnell (R-Ky.). A Senate vote on the package could be held by the midnight deadline, Democratic aides said. The Republican-controlled House will begin considering the bill on Tuesday, with a final vote expected in the next day or two."

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