11/26/2012 01:33 pm ET Updated Jan 26, 2013

The Five Minute Cliff

Allowing the nation to go over the fiscal cliff for a very short period of time will provide all the legitimate political benefits of such a policy dive -- with few to none of the menacing losses that are looming at the bottom. We can readily fly off the cliff on January 1st and be back on the top by January 2nd, 2013 -- even earlier, if you cannot wait that long.

The gains have often been outlined. Allowing the Bush tax cuts to be reversed would allow Obama to increase tax revenues and subsequently introduce new tax cuts. It this gets the Republicans who promised not to raise taxes off the hook and allows all politicians to crow that they cut taxes while increasing revenues -- pure magic. The math is simple: if allowing the Bush tax cuts to expire increases tax rates on average by 4.2 percent, and the new cuts amount to 2 percent -- we still have the remaining 2.2 percent difference as new revenues.

The same holds for the notorious sequester. It involves cutting defense spending by about 10 percent and social spending by 8 percent. However, once these cuts are in place, we can increase defense spending by, say, 5 percent -- which would lead to a defense budget that the Pentagon has let it be known it could live with -- and still use some $270 billion over ten years, saved from this moderate downsizing, to cut the deficit. And we could increase social spending by, say, 6 percent (they have been cut more than defense previously and hence deserve a better treatment) and still save $110 billion over ten years. Moreover, we can allocate the funds in each category differently, rather than mechanically cutting the same amount from all programs by the same percentage (as the law now requires), as long we come up with the agreed total.

The Congressional Budget Office is reported to have established that if we go over the cliff, the drag on the economy will push the U.S. into a recession, slow growth by almost 4 percentage points, and increase unemployment by 2 million in the near term. However, these data concern the state of the economy if we drive over the cliff and just sit there, broken and bloodied, without a plan to bounce back. None of these figures apply if we free-fall for only a very brief period.

Economists keep warning us that businesses do not invest or hire because they are uncertain about what the level of taxation and spending will be. This problem can be readily overcome by Congress and the president if they agree in December 2012 which policies will be in effect as of January 2, 2013. Indeed, it is common for Congress to enact legislation, and for bills to be signed by the president, that take effect only on a later day (including segments of Obamacare). Such an agreement would thus ensure that one and all will know what course the government will follow, and they can make their plans accordingly.

Economists may also argue that the "markets" will not wait and will get spooked by such maneuvers. Well, we should not follow a policy that makes no sense and is bad for the country -- by either yielding to the Republican demands to not raise taxes and to slash social spending or by not fixing the sequester -- just because the stock market will have one of its periodic shake outs. Nor is there a reason for the markets to be rattled if the suggested deal is made and enacted in December.

You may say, why go through this elaborate charade and not just announce that we shall increase taxes by X and reduce spending by Y? Because this would require convincing about 50 million Americans or more that the economic theory that has been drilled into them by right-wing economists and libertarian simpletons is a false one, and show them that the Laffer curve (which claims to show that lower tax rates produce more revenue) is laughable, and that Keynes was right, among other things. Such a public education campaign might actually be a good idea, but Paul Krugman and others have tried to no avail. The time is short, and we need to proceed with a sound economic policy or we shall drive off the cliff and be stuck in the wreck at the foot of the hill. If the formula of going over the cliff for five minutes, or a day, will save us from a major economic dislocation, it is a small price to pay.

Amitai Etzioni is a University Professor of International Relations at The George Washington University and author of Hot Spots: American Foreign Policy in a Post-Human Rights World, published by Transaction. For more on Hot Spots, see: