Fiscal Cliff

[KHONDAHM]

"But Republicans also know they have a problem: many liberal Democrats are more than willing to return to the Clinton-era tax code, and to allow across-the-board spending cuts to take effect, which disproportionately affect the military, rather than compromise too much with Republicans after the strong Democratic showing in the elections.

That sounds about right to me.

Put another way, it means no more wars for awhile (and let's face it: The 99% ARE the military and their families) and back to what we KNOW works: The Clinton-era rates.

There's a large portion of the electorate who have had to go back to eating Ramen noodles. Eating Ramen a while longer if it means their kids will have the opportunity to eat steak again 10 years from now is worth going through the temporary pain of austerity to them. They will manage as they have been doing thus far, and Dems (assuming they have at least as much common sense as they had this past election) should be able to remind the public over and over again that they are suffering because Republicans refused to go along with raising taxes on the wealthy.

Also, the Republican base (big donors) are more likely to fall off the bandwagon and/or won't open their purses so wide come the next election (2014 and 2016) cycles. Again, Dems benefit.

My personal view is that we NEED austerity. Even more than what will be implemented with the fiscal cliff. But, that is a long-term-positive step in the right direction.

[bumper]

The talking heads have been saying the same thing time to bite the bullet, just as we eventually did in the 80's recession, then had two great decades to follow. Interesting a sound bite from a Greenspan speech in 1996, basically getting excited is dangerous. The Dow was 14,000 at the time.

Sadly I don't believe we have had the recession that will clear the decks yet. But. hey I have been wrong before

[bumper]

From the Hill:

Lack of rank-and-file House GOP backlash hints at softening on taxes
By Russell Berman - 12/04/12 08:18 PM ET

Republicans appeared Tuesday to be moving reluctantly toward a debt deal that would increase revenues, one day after Speaker John Boehner (Ohio) offered up $800 billion in tax collection in the fiscal-cliff negotiations.

While outside conservative groups lambasted the new leadership proposal as a tax hike, many rank-and-file House Republicans signaled they were open to it, even if they were not ready to commit their full support.

The lack of immediate backlash within the conference is a key early sign for Boehner, who has made intraparty unity a priority as he seeks the strongest possible hand in negotiations over the “fiscal cliff” with President Obama. The Speaker won support for the $2.2 trillion deficit-reduction offer from his entire senior leadership team, as well as Rep. Paul Ryan (R-Wis.), the 2012 vice presidential nominee and conservative darling.
“I think that Speaker Boehner is the one who has conducted himself as an adult in the whole discussion,” said Rep. Austin Scott (R-Ga.), the conservative president of the GOP’s restive freshman class, who voted against the debt-ceiling deal the Speaker negotiated in 2011.

Boehner’s offer, delivered Monday in a three-page letter to Obama, won a fast thumbs-down both from Democrats and from several conservative organizations and leaders. Heritage Action announced it would rally its members against the plan, while another right-wing group, Americans for Prosperity, said it “left conservatives wanting.”

A leading Senate conservative with close ties to Tea Party groups, Jim DeMint (R-S.C.), labeled the proposal an “$800 billion tax hike” that would “destroy American jobs and allow politicians in Washington to spend even more, while not reducing our $16 trillion debt by a single penny.”

The outgoing chairman of the conservative Republican Study Committee in the House, Rep. Jim Jordan (Ohio), told The Hill that the GOP leadership’s proposal is “a lot better than the president’s, but it’s still a tax increase, so that’s not going to help grow the economy when you are raising taxes.”

In the Senate, Minority Leader Mitch McConnell (R-Ky.) praised Boehner for putting forward the offer but notably declined to endorse it.

Top House Republicans largely shrugged off the conservative opposition, and one leadership aide said it would boost the credibility of Boehner’s offer. “It points to the fact that we’ve put a serious offer on the table — serious compromise,” the aide said. The aide noted that the White House “isn’t facing any backlash” from the left on its offer from last week, which called for $1.6 trillion in tax increases.

Asked by The Hill whether he had any response to the conservatives criticizing his plan, Boehner replied, “No.”

Rep. Cathy McMorris Rodgers (R-Wash.), the newly elected House GOP conference chairwoman, said the proposal was “a work in progress” but that conservative critics “need to be constructive.”

Rep. Tom Rooney (R-Fla.) said he “absolutely” would support Boehner’s proposal and that the White House had not given Republicans enough credit for making a concession on new tax revenues after the election. Obama on Tuesday said there would not be a deal if Republicans did not agree to higher tax rates on the wealthy.

Echoing the complaints of Republican leaders, Rooney said that while the GOP had given ground on revenues, the White House had not made a similar move on entitlement reform or significant spending cuts.

“Good faith is good faith,” he said. “If we give a little, you’ve got to give a little. That’s how it works.”

Rooney said he “disagreed” with conservatives who labeled Boehner’s offer a tax increase, and he noted that his openness to raising revenue through closing loopholes and limiting deductions was different from the response he would have given six months ago to the same plan.

While there was no sign of rebellion, the reaction among rank-and-file Republicans fell well short of a full-on embrace of Boehner’s proposal, and it remains to be seen how lawmakers would respond if the Speaker eventually increases his offer of revenue or bends on the crucial flashpoint of tax rates.

House Majority Leader Eric Cantor (R-Va.) on Tuesday was seen escorting two members of the Republican Study Committee, Reps. Scott Garrett (N.J.) and Tom Graves (Ga.), in for a meeting. Graves said that he was going there to press his case for a deficit plan based more heavily on spending cuts, and indicated he was not happy with Boehner’s proposal.

“It’s a start, but my concern is that this is turning into ‘Who’s going to raise taxes the least?’ And that’s a problem,” Graves said.

Scott said he would have to see how Boehner’s proposal would be scored by the Congressional Budget Office, and Rep. Jeff Flake (R-Ariz.), just elected to the Senate, said he was also studying the details.

Rep. James Lankford (R-Okla.), recently elected to the House GOP leadership team, said that most members hadn’t seen details on how the $800 billion in revenue would be collected. But Lankford reiterated that it was important to Republicans to stand strong against tax-rate increases.

“I think most people don’t know what it is on all the details,” Lankford said when asked if conservatives were grumbling about the Boehner offer. “There is some frustration because people want to see real cuts. I’m from that perspective as well.”

— Erik Wasson, Molly K. Hooper, Bernie Becker and Alexander Bolton contributed to this report.

[rick]

Nkstan questioned whether people whose income was above £250,000 should be considered rich. Well, in 2006 less than 2% of households in USA had incomes above $250,000 dollars. That seems like a reasonable arbitrary point to be called 'rich' although of course no simple definition will be fair. I doubt if things have changed that much. And i would expect most of those are not employees, but directors of companies or those with large investment portfolios. Those who are running businesses where they can take an income of over $250,000 dollars are hardly likely to stop employing some one because there tax has gone up a few thousand dollars, it is the company that pays the salaries anyway.

I was thinking of the middle class as being, apart from white collar/specialist employees, as being the man with a shop who employs a dozen staff, or garage, sawmill, small factory, service company etc. He owns the company and a few thousand extra may make a big difference to his willingness to invest. And his investment will most likely be USA based, not in some overseas subsidiary. Give a tax cut to ordinary working people and they will probably spend it, again mainly within USA.
So, the logic is that tax cuts to stimulate your economy are better spent on the less wealthy. Rich people probably are able to avoid paying their full tax anyway, as they can benefit from various tax avoidance instruments (aka Mitt Romney). The only question is if tax rates on the rich are too high they may relocate to another, lower tax country (this is claimed to have happened with UK's 50% tax rate) however USA's rates are not particularly high, compared with Europe.

Interestingly, during the world wars, the top rate of income tax was as much as 75-94%, and it didn't seem to stop the economy growing. If the recent administrations had upped taxes to pay for the wars, one, the government would have been able to balance their budget, and two, pressure to end the wars would have been greater!

[farlong68]

dont get too carried alway by who wins this one ... raising the debt limit will be here before you know it just about 3 months away and the house has the upper hand in this one....and it goes on and on and on until the market tanks or inflation goes up or the dollar goes in the tank and then the children in d.c. may play nice lol john

[KHONDAHM]

Obama is demanding a deal which includes raising the debt limit. He's not doing the Harry Reid "gentleman's agreement" thing anymore. Republicans were all too happy to renege on that one last time. Boehner is insisting on being able to create another problem in 3 months. Oi vey!

To repeat again regarding the red herring argument about raising taxes on the wealthy or "job creators":

Job creators are going to BORROW money from a bank to hire or expand regardless of what the tax rate is doing. It would be quite stupid to do otherwise. BORROWED money is not taxable, interest rates remain favorable, and banks are willing to lend to those who are qualified. What the tax rates are doing is not going to factor (much) into the bank's decision whether or not to lend whatever amount is requested. They only care about cash flow and collateral.

The wealthy are going to invest, save, or move any tax savings off-shore. A few thousand or hundred thousand is not going to make a difference in their lifestyle or spending habits. If their taxes go up by that much, they are still going to buy and do whatever they were going to buy or do, anyway.

Let's put it in close-to-home terms: If the THB exchange rate goes up 3-5% (the expected "fiscal cliff" increase) which would be 1-1.5 baht, is your personal world going to collapse? No. Are you still going to do whatever you were going to do? Buy that house, car, groceries? Buy that non-performing bar being resold for the 12th time? Yes.

Republicans are saying the wealthy would be unduly burdened. That's a bunch of crap and a red herring argument. It is also a fallacy to imagine that a 3-5% tax hike would make much difference to those who are the working poor or middle-class. In fact, the majority of employees could offset the ENTIRE affect of any increase on take-home pay by simply increasing their exemptions by 1 or 2. Remember, these are unsophisticated people who think getting a refund is a good thing and something to look forward to every year. The impact would be deferred until tax time 2014 in the form of a lower refund. Certainly, the unemployed don't much care (despite being affected indirectly) because their tax rate would still be 0% whatever happens.

Obama and his team figured all this stuff out last year when they cut the deal. The Republicans are just starting to wake up and smell the coffee...The leadership are as slow as they look.

[TJ]

This assessment of U.S. taxs and debts provides some understanding of the nation's financial problems.

"Former Congressmen Chris Cox and Bill Archer have written an article -- "Why $16 Trillion Only Hints at the True U.S. Debt," The Wall Street Journal (November 26, 2012) -- pointing out our dire economic straits. They say, "When the accrued expenses of the government's entitlement programs are counted, it becomes clear that to collect enough tax revenue just to avoid going deeper into debt would require over $8 trillion in tax collections annually. That is the total of the average annual accrued liabilities of just the two largest entitlement programs, plus the annual cash deficit." Let's analyze that.

Washington would have to collect $8 trillion in tax revenue, not to pay off our national debt and have reserves against unfunded liabilities, but just to avoid accumulating more debt. Recent IRS data show that individuals earning $66,000 and more a year have a total adjusted gross income of $5.1 trillion. In 2011, corporate profit came to $1.6 trillion. That means if Congress simply confiscated the entire earnings of taxpayers earning more than $66,000 and all corporate profits, it wouldn't be enough to cover the $8 trillion per year growth of U.S. liabilities.

Given this impossible picture, the message coming out of Washington, especially from our leftist politicians and the news media, is that we solve our budget problems by raising taxes on the rich. If Americans were more informed, such a message would be insulting to our intelligence. There are not enough rich people to satisfy Congress' appetite.

In 2011, Congress spent $3.7 trillion. That turns out to be about $10 billion per day. According to IRS statistics, roughly 2 percent of U.S. households have an income of $250,000 and above. By the way, $250,000 per year hardly qualifies as being rich. It can't even buy a Learjet.

Households earning $250,000 and above account for 25 percent, or $1.97 trillion, of the nearly $8 trillion of total household income. If Congress imposed a 100 percent tax, taking all earnings above $250,000 per year, it would bring in about $1.9 trillion. That would keep Washington running for 190 days, but there's a problem because there are 175 more days left in the year.

The profits of the Fortune 500 richest companies come to $400 billion. That would keep the government running for another 40 days, to mid-July.

America has 400 billionaires with a combined net worth of $1.3 trillion. If Congress fleeced them of their assets, stocks, bonds, yachts, airplanes, mansions and jewelry, it would get us to at least late fall.

The fact of the matter is there are not enough rich people to come anywhere close to satisfying Congress' voracious spending appetite. The true tragedy for our future is that there are millions of uninformed Americans who will buy the political demagoguery and treachery that our problems can be solved by taxing the rich."

http://townhall.com/columnists/walterew ... ampaign=nl

[KHONDAHM]

That article is a great example of the ridiculous misinformation Republicans are using to make their decisions/arguments. It is almost totally irrelevant and mixes apples, oranges, grapes, and pears.

The profits of the Fortune 500 richest companies come to $400 billion. That would keep the government running for another 40 days, to mid-July.

Ummmm...so that only leaves several THOUSAND companies out of the equation. Republican math at it's finest.

America has 400 billionaires with a combined net worth of $1.3 trillion. If Congress fleeced them of their assets, stocks, bonds, yachts, airplanes, mansions and jewelry, it would get us to at least late fall.

Ummmm...taxes are paid from income, not assets. D'oh! Quick! Send a memo to those people!

The fact of the matter is there are not enough rich people...

Oh, so now they figure taxes are based on headcount? Oi...

I'm not even going to bother with the rest of it. It's all garbage and debunk-able by anyone with common sense, an understanding of how things actually work, and time to waste.

[farlong68]

dear kd just two points any deal made by harry reid is no gentlemans agreement. and the right to borrow funds to run the goverment is given to the congress and not the pres.. i dont want bush or obama to have unlimited power to put us deeper in debt altough bush and obama have done a pretty good job of it even having to work with the congres..sad days indeed john

[bumper]

So, the logic is that tax cuts to stimulate your economy are better spent on the less wealthy. Rich people probably are able to avoid paying their full tax anyway, as they can benefit from various tax avoidance instruments (aka Mitt Romney). The only question is if tax rates on the rich are too high they may relocate to another, lower tax country (this is claimed to have happened with UK's 50% tax rate) however USA's rates are not particularly high, compared with Europe.

Sounds like Robin Hood

[merchant seaman]

This all ado about nothing. The Dems and Reps are both playing their usually games. If they really cared they would pay into social security, do away with their free health care and sign up for Obama care, and any pay raises put to a vote by the voters. They care for only themselves and not you and me. Fiscal Cliff or no Fiscal Cliff politics will go on as usually and the gov't will go deeper in debt, that is realailty.

[KHONDAHM]

Ha! REALLY, tho?

Debt Ceiling Bluff Called By Harry Reid, Leaving Mitch McConnell To Filibuster Himself
http://www.huffingtonpost.com/2012/12/0 ... f=politics

How can any sane and rational Republican read this stuff and NOT want to throw their leadership off the cliff instead? We are well and truly a Banana Republic complete with Republican nuts.

WASHINGTON -- A move to embarrass Democrats backfired on Senate Minority Leader Mitch McConnell Thursday as the Kentucky Republican proposed a vote on raising the nation's debt ceiling -- then filibustered it when the Democrats tried to take him up on the offer.

On Thursday morning McConnell had made a motion for the vote on legislation that would let the president extend the country's borrowing limit on his own. Congress would then have the option to disapprove such hikes, in a fashion similar to one that McConnell first suggested during last year's standoff over the debt ceiling.

The minority leader apparently did not think Senate Majority Leader Harry Reid (D-Nev.) would take him up on his offer, which would have allowed McConnell to portray President Barack Obama's desire for such authority as something even Democrats opposed.

Reid objected at first, but told McConnell he thought it might be a good idea. After Senate staff reviewed the proposal, Reid came back to the floor and proposed a straight up-or-down vote on the idea.

McConnell was forced to say no.

"What we're talking about here is a perpetual debt ceiling grant, in effect, to the president, " McConnell said. "Matters of this level of controversy always require 60 votes."

Sixty votes are required to end a filibuster during debate on a bill and hold a vote.

Democrats immediately seized on McConnell's reversal, noting it was the sort of obstruction that they think warrants changes to the rules on filibusters.

"What we have here is a case of the Republicans here in the Senate once again not taking yes for an answer," Reid said. "This morning the Republican leader asked consent to have a vote on his proposal. Just now I told everyone we're willing to have that vote, an up-or-down vote, and now the Republican leader objects to his own idea, so I guess we have a filibuser of his own bill."

[bumper]

I thought these guys would have had at least finished the first grade, guess not

[FrazeeDK]

too little concern for fixing the issue on both sides. Each side is now gaming every element to gain political clout or make the other side look bad rather than finding the appropriate mix of spending cuts, revenue increases, entitlement reform, and tax code rewrites...

[harmonyudon]

Talking about Tax, are the board members of Amazon "tax-crooks" or do they think that are clever?

Amazon's Luxembourg arrangements have deprived European governments of hundreds of millions of dollars in tax that it might otherwise have owed, as reported in European newspapers. But a Reuters examination of accounts filed by 25 Amazon units in six countries shows how they also allowed the company to avoid paying more tax in the United States, where the company is based.

In effect, Amazon used inter-company payments to form a tax shield for the group, behind which it has accumulated $2 billion to help finance its expansion.

Amazon revealed last year that the U.S. Internal Revenue Service (IRS) wants $1.5 billion in back taxes. The claim, which Amazon said it would "vigorously contest", is linked to its foreign subsidiaries and payments made between them.

Read more:
http://www.reuters.com/article/2012/12/ ... AR20121206

[parrot]

Except we're not talking about 'tax', we're talking about fiscal cliff!

[harmonyudon]

Except we're not talking about 'tax', we're talking about fiscal cliff!

Amazon revealed last year that the U.S. Internal Revenue Service (IRS) wants $1.5 billion in back taxes

[gudtymchuk]

So how can the dimwitted Politicians in Washington explain how raising taxes a few percentage points on a small minority of wealthy Americans without also some very stringent austerity measures against over-the-top entitlements going to STOP the spending insanity. To some falling off the fiscal cliff is only a minor inconvenience......
(CNSNews.com) – The federal government ran a deficit of $292 billion for the first two months of fiscal year 2013 – October and November 2012 – amounting to $4.8 billion of borrowed money each day.

“The federal budget deficit was $292 billion for the first two months of fiscal year 2013, $57 billion more than the shortfall recorded in October and November of last year,” CBO said in its Monthly Budget Review Friday.

This means that the government borrowed $4.8 billion for each calendar day so far in 2013. If the Treasury Department restricted its borrowing to only weekdays, its per day average would jump to $6.5 billion per day thus far in fiscal year 2013.

CBO reported that federal revenues rose by $30 billion – a 10 percent increase over last year, but spending increased more, going up by $87 billion or 16 percent.

Overall, the two-month deficit figure was $57 billion higher than the October-November 2012 deficit.

CBO reported that shifts in when the government made certain payments accounted for some of the increase in spending.

Spending on Medicare, Medicaid, and Social Security were about seven percent higher -- $8 billion than last year. Had these shifts in the timing of government spending not occurred, the two-month deficit figure would have been $8 billion lower than last year’s figure – about $227 billion.
Here is the source.
http://cnsnews.com/news/article/cbo-fed ... 013-so-far

[KHONDAHM]

too little concern for fixing the issue on both sides. Each side is now gaming every element to gain political clout or make the other side look bad rather than finding the appropriate mix of spending cuts, revenue increases, entitlement reform, and tax code rewrites...

It's blatantly clear that it is absolutely NOT a "both sides...blah, blah, blah" problem. EVERYTIME Republicans put something on the table where the math works (a rarity) and Dems say "OK, let's do it.", Republicans pull it back off the table over and over again. Republicans have been the problem and remain the problem. Period. My last post was just one of dozens of such episodes.

You want another? Boehner put forth $1 T of revenue BEFORE they lost the elections. So rather than listen to the voice of The People and start there, he put forth something like $300+ B LESS after the elections. That is ridiculous. His deal effectively demands everything they want in exchange for giving Dems a weak commitment to maybe talk about extending the payroll tax cut perhaps next year maybe sort of...or not. It's silliness to bargain with stupid.

All reports are that Obama is ready and willing to go over that cliff. His supporters are not only behind him, they're pushing while cheering him on. It wouldn't be a bad thing either, IMHO. I say jump while clutching Boehner's and McConnell's throats!

[gudtymchuk]

All reports are that Obama is ready and willing to go over that cliff. His supporters are not only behind him, they're pushing while cheering him on. It wouldn't be a bad thing either, IMHO. I say jump while clutching Boehner's and McConnell's throats!

I thought your man Obama was all about the middle class? So let me get this straight, you are saying he and his ilk are willing to put the middle class in desperate straights, create certain market upheaval, stagnate employment, and more than likely create another recession just so he can get a little political comeuppance? Obama is a chump, but is he really that stupid. I don't think so. He still has his precious legacy to look after and, as big a narcissist as he is, he cares more about his ego and legacy than showing up a few lifeless republicans.
Rand Paul also has no problem with going "over the cliff" His theory is really very simple. Obama will OWN the results and will also pay a much dearer political price than his counterparts in the long run. Four years is a long time to continue to hide behind blaming the other party and GH Bush.
There is no sanity in Washington. Only sick, morbid politicians playing power games. :-"