The Fiscal Cliff Approacheth

[Direckshun]

In an effort to make this thread sticky-worthy, I am going to update this OP to keep casual glancers informed.

This post is the official one-stop shopping of the key points/developments of the fiscal cliff negotiations.

Far as I understand, the fiscal cliff:

1. Gets rid of the Bush tax cuts for the wealthy.
2. Gets rid of the Bush tax cuts for everybody else.
3. Slashes defense spending by something like $500 billion.
4. Slashes domestic programs like the NIH, Head Start, and medicine/drug care for the poor by $500 billion.

The new idea is for Democrats to allow the cliff to hit, then immediately introduce a bill that would bring 2, 4, and some of 3 back. But not 1.

Here is a chart detailing exactly what the fiscal cliff is going to do, financially:

Spoiler!

Originally Posted by Direckshun

New CBO projection: if the fiscal cliff hits, we are in another recession, and lose two million jobs.

http://www.reuters.com/article/2012/...87L0JV20120822

The poor would be hurt by the fiscal cliff:

Originally Posted by Direckshun

Overall, if the tax breaks from the 2009 stimulus are allowed to expire—the EITC and Child Tax Credit expansions, along with American Opportunity Credit for college tuition—the poorest 20 percent of Americans would see their taxes go up by $209 on average, reducing their after-tax income by 1.9 percent, according to the Tax Policy Center.

As would the middle class:

Originally Posted by Direckshun

According to estimates by the Tax Policy Center, more than half of all married couples will owe an additional tax of around $4,000 unless Congress acts. And more than a third of families with children will fall subject to the AMT, with parents of three or more children facing an extra tax of $4,700.

Among married couples with at least two children and adjusted gross income between $75,000 and $100,000, the center estimates that 84 percent will face a significantly higher tax bill this year because of the AMT.

There seems to be some consensus between the parties that substantial revenues want to be raised. Boehner and the GOP hopes that's through limiting tax deductions rather than tax raises.

Obama's opening offer, essentially:

• Allow the Bush tax cuts on high earners to expire. $849 billion
• Limit itemized deductions to 28 percent, close some loopholes and deductions on high earners, eliminate tax breaks for oil and gas companies, eliminate the carried interest loophole, plus a few other items. $584 billion
• Create a special "Buffett Rule" tax rate for millionaires. $47 billion
• Restore the estate tax to 2009 levels. $143 billion
• Limit corporate income shifting to low-tax countries. $148 billion
• Other miscellaneous tax increases and reductions. About -$200 billion
• Total: $1.6 trillion

[patteeu]

Originally Posted by FD

Agreed. Its a complete anachronism in the world of modern budgeting and should be done away with.

It's a reminder to people of our ever growing debt.

[patteeu]

Originally Posted by Direckshun

You support a party with two-plus decades of deficit exploding.

I support a party that can deal with budgets responsibly.

Does your party ride unicorns to work too?

[petegz28]

Originally Posted by Direckshun

You support a party with two-plus decades of deficit exploding.

I support a party that can deal with budgets responsibly.

When your party can't even pass a budget, it's hard to say they can budget responsibly. Considering the last time we had anything close to a balanced budget it was under a Repub controlled House and Senate, you really have nothing much to stand on.

[HonestChieffan]

Originally Posted by patteeu

Does your party ride unicorns to work too?

They break apart in mid air!

[FD]

Originally Posted by patteeu

It's a reminder to people of our ever growing debt.

I agree that is valuable. The McConnell plan that Geithner proposes extending preserves that aspect, while removing the risk of default. Its a good compromise.

[Direckshun]

Originally Posted by patteeu

It's a reminder to people of our ever growing debt.

An unnecessary reminder, as we're already well aware.

[Direckshun]

Originally Posted by patteeu

Does your party ride unicorns to work too?

Originally Posted by petegz28

When your party can't even pass a budget, it's hard to say they can budget responsibly.

I'll take Obama and Clinton's record on fighting deficits over Bush and Reagan's.

[Direckshun]

[patteeu]

Originally Posted by Direckshun

I'll take Obama and Clinton's record on fighting deficits over Bush and Reagan's.

Kim Jong Il used to shoot several holes-in-one per round of golf too.

[Bewbies]

Originally Posted by Direckshun

I'll take Obama and Clinton's record on fighting deficits over Bush and Reagan's.

Obama's record on fighting deficits?

You're trolling the shit out of this place. Good work.

[Direckshun]

http://www.nytimes.com/2012/12/04/op...f=opinion&_r=0

The Truly Grand Bargain
By DAVID BROOKS
Published: December 3, 2012

Sometimes you have to walk through the desert to get to the Promised Land. That’s the way it is for Republicans right now. The Republicans are stuck in a miserable position at the end of 2012, but, if they handle things right, they can make 2013 an excellent year — both for their revival prospects and for the country.

First, they have to acknowledge how badly things are stacked against them. Polls show that large majorities of Americans are inclined to blame Republicans if the country goes off the “fiscal cliff.” The business community, which needs a deal to boost confidence, will turn against them. The national security types and the defense contractors, who hate the prospect of sequestration, will turn against them.

Moreover a budget stalemate on these terms will confirm every bad Republican stereotype. Republicans will be raising middle-class taxes in order to serve the rich — shafting Sam’s Club to benefit the country club. If Republicans do this, they might as well get Mitt Romney’s “47 percent” comments printed on T-shirts and wear them for the rest of their lives.

So Republicans have to realize that they are going to cave on tax rates. The only question is what they get in return. What they should demand is this: That the year 2013 will be spent putting together a pro-growth tax and entitlement reform package that will put this country on a sound financial footing through 2040.

Republicans should go to the White House and say they are willing to see top tax rates go up to 36 percent or 37 percent and they are willing to forgo a debt-ceiling fight for this year.

This is a big political concession, but it’s not much of an economic one. President Obama needs rate increases to show the liberals he has won a “victory,” but the fact is that raising revenue by raising rates is not that much worse for the economy than raising revenue by closing loopholes, which Republicans have already conceded.

In return, Republicans should also ask for some medium-size entitlement cuts as part of the fiscal cliff down payment. These could fit within the framework Speaker John Boehner sketched out Monday afternoon: chaining Social Security cost-of-living increases to price inflation and increasing the Medicare Part B premium to 35 percent of costs.

But the big demand would be this: That on March 15, 2013, both parties would introduce leader-endorsed tax and entitlement reform bills in Congress that would bring the debt down to 60 percent of G.D.P. by 2024 and 40 percent by 2037, as scored by the Congressional Budget Office. Those bills would work their way through the normal legislative process, as the Constitution intended. If a Grand Bargain is not reached by Dec. 15, 2013, then there would be automatic defense and entitlement cuts and automatic tax increases.

Both parties say they are earnest about fundamental tax and entitlement reform. This deal would force them to think beyond the 10-year budget window and put credible plans on the table to address the long-term budget problems while there is still time. No more waiting for the other guy to go public with something serious. The ensuing debate would force voters to face the elemental truth — that they can only have a government as big as they are willing to pay for. It would force elected officials to find a long-term pro-growth solution as big as Simpson-Bowles.

Republicans could say to the country: Hey, we don’t like raising tax rates. But we understand that when a nation is running a $16 trillion debt that is exploding year by year, everybody has to be willing to make compromises and sacrifices. We understand that the big thing holding the country back is that the political system doesn’t function. We want to tackle big things right now.

The year 2013 would then be spent on natural Republican turf (tax and entitlement reform) instead of natural Democratic turf (expanding government programs). Democrats would have to submit a long-term vision for the country that either reduced entitlement benefits or raised middle-class taxes, violating Obama’s campaign pledge. Republicans would have to face their own myths and evasions, and become a true reform and modernization party.

The 2012 concession on tax rates would be overshadowed by the 2013 debate on the fiscal future. The world would see that America is tackling its problem in a way that Europe isn’t. Political power in each party would shift from the doctrinaire extremists to the practical dealmakers.

Besides, the inevitable package would please Republicans. The House would pass a conservative bill. The Senate would pass a center-left bill. The compromise between the two would be center-right.

It’s pointless to cut a short-term deal if entitlement programs are still structured to bankrupt our children. Republicans and Democrats could make 2013 the year of the truly Grand Bargain.

[Direckshun]

This is my feeling as well, which I expressed a few posts ago:

While the two proposals seem far apart -- and they are -- look at them when you split the difference between the two. You get $1.2 trillion in revenue and about $450 to $500 billion in savings to Medicare and Medicaid. And then say you throw in some stimulus for the Democrats (unemployment insurance, transportation spending), as well as the cost-of-living adjustments on Social Security for Republicans. That sounds like a pretty serious deal that both sides could live with, though it would look more like a "win" for the White House. Of course, Republicans would have to relent (in some form or fashion) on rates going up, while Democrats would have to acquiesce (one way or another) on the Social Security.

[Direckshun]

Originally Posted by Bewbies

Obama's record on fighting deficits?

You're trolling the shit out of this place. Good work.

Thanks.

[patteeu]

Originally Posted by Direckshun

Thanks.

You don't get credit for reverting to the mean after driving a deficit to spectacular, unprecedented heights in the first place.

[Direckshun]

Originally Posted by patteeu

You don't get credit for reverting to the mean after driving a deficit to spectacular, unprecedented heights in the first place.

Exactly how high has the deficit risen under Obama, compared to when he took office?