Spain: Is this how the financial cliff operates?

When Franco left as Spain's Ruler, Spain was in good shape economically. But, the people of Spain listened to the siren song of Social Democracy and the temptation of getting something for nothing set them on a path to ruin. It did not happen overnite. Candidates for election vied with each other to deliver more. With each delivery of something for nothing (or for something run by the government), the overall health of the country grew less robust, untill the election of a Socialist government. Spain's Socialists fought the phantom war on global warming, creating expencive energy, less competitive industry and greater national debt to continue government spending.

The Socialists were defeated in the last election and Spain tried to revert to what was happening before the Socialist government. But, Social Democracy (Soft Socialism) is also a path to failure. Spain's debts grew to unsustainable levels.

That's when the ECB intervened. In fact, the ECB forced Spain to reduce government spending and raise taxes - not a lot, but still the reduction in spending and the increase in taxes were supposed to mreduce the deficit. It didn't happen. Why? Because the reduced spending and increased taxes created a fiscal cliff and Spain's recession deepened. That, of course, increased the deficits.

So, what is the lesson for us? Will we have a fiscal cliff? Hard to tell. If Obama is re-elected, we certainly will, because Obama wants higher taxes on higher earners. Please remember that contrary to the demagoguery, wealth is not taxed. IT IS CALLED AN income tax BECAUSE IT IS INCOME THAT'S TAXED. If Romney wins, his instinct is to cooperate with the Dems and the Dems want higher taxes. Will a Republican House agree? Unknown.

Central to the Romney plan is to increase oil and gas production and to tame the EPA. Having cheap energy and plenty of it will eliminate China's adventage of cheap labor, but this effect will take years. In the meantime, the Democrats can demagogue, sabotage and slow the economic recovery if they can. A fiscal cliff and a recession would certainly fuel Pelosi's hopes of growing the economy with unemployment checks.