I agree with Ezra Klein and apparently the Congressional Republicans that it is the latter, see http://www.washingtonpost.com/blogs/wonkblog/wp/2012/12/05/the-gops-bizarre-doomsday-plan . The former is just a slope, even if my state of Virginia will be hard hit if the full DOD cuts go through and are not offset, given that 10% of the VA GDP is DOD directly. As for the tax changes, well, the fiscal cliff tax changes involve simply going back to the Clinton tax code under which the US saw its most rapidly growing economy in the last quarter century, certainly something worth freaking out about (eeeek!). And has been widely reported, both the tax increases and the spending reductions will only come in gradually, so instead, to the extent it is anything all that awful at all, it will come in only gradually, a slope for sure, but not a cliff. So far, the stock market has largely ho-hummed over all this, sliding sideways in a "fog of uncertainty," as CNN put it, upsetting such figures as Chris Matthews who thinks it should be crashing hard to teach us all a lesson (eeeek!), but is exactly what the EMH random walk theory tells us should happen if no news of any significance is arriving. And to top it all off, apparently by 4 to 1 the public thinks that "falling off the fiscal cliff" means that budget deficits will rise rather than fall. Oh my.
So, indeed, the real danger is that the Congressional GOPsters may be plotting to return to refusing to raise the debt ceiling when it seriously comes due some time early this coming year, just as they did in late 2011, leading to the infamous credit downgrade of the US, which was followed by a decline in interest rates on US government securities (eeeek!). Klein reports that the "doomsday plan" of the Congressional GOPsters if there is no resolution of the fiscal cliff negotiations by the end of the year is to pass the bill to extend the Bush middle class tax cuts that was passed by the Senate and then wait to play chicken over the debt ceiling increase when it finally comes due, indeed attempting a repeat of their blackmail game of 2011 that gave us this hysterically absurd fiscal cliff pseudo-drama in the first place.
So, let us be clear. Indeed, the doomsday plan is not the passage of this Senate bill by the House, which seems to me to be a total non-event. It is the renewed threat to try to hold up the debt ceiling increase. Not increasing the debt ceiling could indeed lead to a real mess if actually carried out beyond some point, with rising interest rates that would put us back into recession and probably tank most of the global economy as well. This is a real threat, and the Tea Party types really had fun with this in their efforts to try to wrangle out of Obama the sorts of cuts in Social Security, Medicare, Medicaid, food stamps, and so on, that they just dearly desire to have happen, just as long as it is Obama proposing them so that they can blame him for them after they are adopted and the public becomes infuriated about it (see their carrying on about his supposed Medicare cuts associated with ACA). So, there is a real problem here.
Well, we have been to this one before. A whole lot of us, including probably Bruce Bartlett first, but an increasing chorus since, says that the solution to this problem, which threatens to come up now every time the debt ceiling is approached, is to end the debt ceiling. It was unconstitutional when it was first adopted in 1917, and it still is. Nobody noticed it back then, only four years after the federal income tax became constitutional due to an amendment, and they continued not to notice it later as long as Congress did what it was "obvioius" it should do, which was to raise the damned thing every time it was approached. But since the norm was broken in 2011, we now have to face it. It is unconstitutional and incoherent. It must go, and Obama must bite the bullet and make it go when the moment of attempted blackmail and doom comes.