PoliticsJune 6, 2024

A short history of the ‘fiscal cliff’


It’s the phrase du jour in parliament, but what does it mean, where did it come from, and why do our politicians love saying it so much?

A fiscal cliff is certainly an evocative image. What comes to mind is a large cliff by the sea (waves breaking violently at the bottom) that we’re afraid of falling off, or perhaps of accidentally dropping all our money off. How many on-screen villains and heroes have come to their ultimate demise via that exact route? Heaps. How many people are afraid of heights? 8,113,118,533 and counting. These are some of the things that make it an excellent phrase, politically, and have seen it spread from Willis’s mouth into other lips and many headlines about funding and budgets.

I’ve dated Willis’s use of the phrase fiscal cliff to early last December, during the first post-cabinet press conference when she announced the forthcoming mini mini mini budget, which would address the “fiscal cliffs” left by the previous government. To Willis, fiscal cliffs happen when funding for a programme or policy has been provided for a limited period, if there was a “clear public expectation” that it would continue beyond that. Willis identified 21 fiscal cliffs, notably time-limited funding for Pharmac and the Ka Ora, Ka Ako school lunch programme. Previous finance minister Grant Robertson seemed to find these critiques preposterous, saying they showed Willis hadn’t read his budget. Time-limited funding is an ordinary part of putting together a budget, he said. 

A classic rivalry (RIP).

As Thomas Coughlan wrote in the Herald, labelling time-limited funding a “fiscal cliff” is a National Party invention. It’s a snappy phrase, and Willis’s colleagues in government – and the media – took it up with enthusiasm. According to Hansard, “fiscal cliff” has been used in parliament on 15 different dates this year so far, with the most committed fans of the phrase David Seymour and Chris Bishop. It seems to have taken over from the “fiscal hole” that has burned brightly on various occasions since it was first brought into common usage by the National Party in 2017, and prompted hysterics in the House in August last year when Willis asked Robertson how big his was.

It’s worth noting that the fiscal cliffs of the current coalition government in New Zealand are different to other fiscal cliffs. The phrase came to prominence in the early 2010s to describe an oncoming economic crisis in the United States. Tax increases and government spending cuts were both due to take effect on January 1, 2013, the combination of which was forecast to tip the economy into a recession. Although many commentators suggested it would perhaps be a slope, hill or diet, those phrases did not take off (perhaps not scary enough?). Adjustments were made to avoid the cliff, and the US went into a debt-ceiling crisis instead. Even longer ago, in 1957, the phrase appeared in the New York Times property section, to refer to people over-borrowing on their first home. It’s thought that this is the original fiscal cliff.

Before the fiscal cliff, there was the fiscal precipice. A 1893 editorial in the Chicago Tribune reads, “The free silver shriekers are striving to tumble the United States over the same fiscal precipice.” Back in the 2012 cliff days, American lexicographer Ben Zimmer told the BBC, “The metaphor of the precipice is clearly an ancient one.” I would add that falling to one’s death is clearly an ancient fear. He thought cliff was a better word than precipice for the “modern age”. 

Last week, Willis presented Budget 2024, which she said “restores discipline to spending to get the books back in order”. On page 72 is the section of time-limited funding. There are seven items here, including police cost pressure funding, the school lunch programme and the first two years of the Ministry of Social Development’s Te Pae Tawhiti transformation programme. Newsroom’s Laura Walters has labelled this page the “fiscal cliffs page”, saying it’s doubly notable since National’s criticism of time-limited finding by the previous government has been relentless. As Infometrics principal economist Brad Olsen said, fiscal cliffs clearly aren’t going anywhere any time soon.

Keep going!