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

[mnchiefsguy]

Originally Posted by Direckshun

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

FYP

[petegz28]

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?????

[patteeu]

Originally Posted by Direckshun

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

About $6 trillion, cumulatively speaking. Is that what you mean or are you looking for his annual high water mark?

[Direckshun]

Originally Posted by patteeu

About $6 trillion, cumulatively speaking. Is that what you mean or are you looking for his annual high water mark?

Do you know the difference between deficits and debt?

[Direckshun]

The GOP really needs to get its shit together.

There are a ton of wedges the Obama administration can cram down the GOP's throat over the next two years. Responsible deficit reduction should not be one of them.

But, apparently it is. The GOP is a mess right now.

Top Senate Republican leaders avoided endorsing explicitly House Speaker John Boehner‘s deficit proposal on Tuesday, as the White House and congressional Democrats continued to insist any deal will have to call for revenue levels Republicans have said they can’t accept.

Senate Minority Leader Mitch McConnell (R., Ky.), asked directly whether he supports Mr. Boehner’s plan, declined to offer an explicit endorsement. Instead, he said he commended House Republicans for trying to move the negotiation process forward.

Meanwhile, once you start breaking down the details of Boehner's "plan," it's actually a worse deal for the Democrats than the fiscal cliff, something that must have taken considerable effort to pull off:

http://www.tnr.com/blog/plank/110727...are-eligiblity

The Fiscal Cliff Is Better than Boehner's Lousy Offer
Jonathan Cohn
December 3, 2012 | 9:08 pm

One reality in the fiscal debate changed on Monday. And one did not.

Here’s the reality that changed: President Obama can no longer accuse House Republicans of failing to present a plan for reducing the deficit. On Monday afternoon, Speaker John Boehner did just that, in a letter to the president laying out the basic parameters of what his caucus would be willing to accept—pushing up the retirement age for Medicare, reducing the growth of Social Security benefits, and closing tax loopholes to raise a modest amount of revenue.

Here’s the reality that didn’t change: Obama has insisted that any deal meet several conditions—among them, higher income tax rates on the wealthy, an end to the debt ceiling drama, and stimulus for the fragile recovery. Republicans have said no way. And with this proposal, Boehner and the Republicans are still saying … no way. The new proposal merely commits to paper a few ideas that Republicans have been floating for the last few weeks. It does so with the usual level of specificity—which is to say, very little specificity at all.

It’s progress, of a sort. At least both sides in the negotiation now have official positions for which they can be held accountable. For example, the offer should make clear, once and for all, which party is eager to cut benefits for seniors. (Hint: It’s the party that just proposed to cut benefits for seniors.) But the actual positions of the two parties have not changed. And that means this offer remains far from anything Obama and the Democrats should even contemplate accepting—for the very simple reason that accepting it seems far worse than going over the “fiscal cliff” on January 1.

Remember, January 1 is the date when all of the Bush tax cuts expire, thereby restoring rates to what they were during the Clinton era. It’s the date when a series of substantial spending cuts automatically start to take effect, taking a big bite out of domestic programs and a bigger bite out of defense spending. It's the date when a payroll tax holiday and extensions of unemployment insurance, designed to bolster growth and ease human misery while the economy remains weak, expire.

The cumulative effect of these would be to reduce the deficit (yay!) but in a way that sucked a lot of money out of the economy (boo!). If it all comes to pass, the country could fall back into another recession. Exactly how quickly that would happen, nobody can say—in part because Obama could, via administrative actions like telling the Internal Revenue Service not to change withholding tables, delay the impact.

The uncertainty and potential for economic hardship, particularly after the first few weeks, make it an unappealing option. But is it more unappealing than the alternative? Let's look at what Boehner is offering—and let's start with his proposal to raise the eligibility age for Medicare. He presumably has in mind a gradual increase in the age, from 65 to 67. The Congressional Budget Office concluded this option would reduce government spending by more than $100 billion over ten years.

That’s real savings, for sure. But they’d come at a terrible cost. The majority of 65- and 66-year-olds would end up with skimpier coverage than they’d have with Medicare—and some would end up with no coverage at all—leaving them exposed to higher expenses. Businesses would also face higher costs, because some of those 65- and 66-year-olds would stay on employer policies. Medicare premiums would also inch higher, since the pool of people in Medicare would be older overall. Overall, according to independent assessments, the government would spend less on medical care, but the country as a whole would spend more, which is precisely the opposite of what public policy is supposed to be achieving right now. (This report from the Kaiser Family Foundation has a full analysis and this item from Sarah Kliff puts it into context, if you want to know more.)

Boehner's proposal also calls for another $300 billion in cuts to so-called discretionary spending. (That's spending Congress must reauthorize from time to time.) The proposal doesn't specify which cuts, but they'd be above and beyond those automatic cuts, which will reduce discretionary spending to historic lows. Adding another $300 billion in cuts would likely "pose significant risks to investments in areas from education to scientific research to food safety to border security to children’s programs such as child care, [the Women, Infant, and Children food assistance program], and Head Start," according to a statement by Robert Greenstein, president of the Center on Budget and Policy Priorities. "In short, people with low incomes or serious disabilities, and elderly people of modest means, would face substantial cuts."

But the problem with Boehner’s proposal goes beyond these specifics. Today the Republican Party stands behind two principles that threaten to undermine the nation’s long-term prosperity. One is their absolute, ironclad opposition to higher income taxes on the rich. Without the revenue from higher rates—eventually on the middle class as well as the rich, if I had my way—it’s not possible to stabilize the deficit, barring cuts to programs that would undermine future productivity and the financial security of even middle class Americans. The other threat to prosperity is the Republican willingness to use the debt ceiling as a tool for policy extortion. As long as that possibility exists, it will create regularly recurring crises like the one that happened in the summer of 2011.

Breaking Republican positions on taxes for the wealthy and the debt ceiling, while making real progress towards reducing the deficit, might seem like seem like a lot to ask. But if January 1 comes and goes, one of them (real progress on the deficit) will happen, because the deficit will come way down; another (opposition on tax hikes for the rich) won’t matter, because taxes on the rich will go up anyway; and another (use of the debt ceiling) won’t matter for a long time because the sudden burst of deficit reduction will postpone, at least for a while, the moment when the government again hits the debt ceiling. And that's not to mention the possibility that Obama could dispense with the debt ceiling altogether, by availing himself of controversial options he wouldn't consider last time around.

The risks of going over the fiscal cliff are real, which is why Obama and the Democrats should keep trying for a deal. And if Obama and Democrats are determined to extract concessions like extensions of unemployment insurance, as they should be, they're going to have to make some concessions of their own—particularly if Republicans opt for a "doomsday plan" and preemptively concede on tax cuts on middle incomes.

But Obama and the Democrats can do better than what Boehner offered on Monday. A lot better.

[mlyonsd]

Originally Posted by Direckshun

Do you know the difference between deficits and debt?

You do realize when you run deficits in consecutive years they add up right?

Maybe that's why liberals don't get it.

[Direckshun]

Originally Posted by mlyonsd

You do realize when you run deficits in consecutive years they add up right?

Obama inherited the worst deficit in American history, and cut it faster than anybody has cut a deficit since WW2.

In a recovery from a recession.

I'll take that against anybody's record on deficits in modern American history.

[mlyonsd]

Originally Posted by Direckshun

Obama inherited the worst deficit in American history, and cut it faster than anybody has cut a deficit since WW2.

In a recovery from a recession.

I'll take that against anybody's record on deficits in modern American history.

Lighten up. We all know Obama is the most fiscal and green president in history. Especially now when the election is over and AF-1's engines can cool off.

He's quite the guy.

[donkhater]

Originally Posted by Direckshun

Obama inherited the worst deficit in American history, and cut it faster than anybody has cut a deficit since WW2.

In a recovery from a recession.

I'll take that against anybody's record on deficits in modern American history.

So I guess I'm confused. Why then isn't the Great Obama proposing to return all tax rates to the Clinton levels instead of just the top 2%? Doesn't that reduce deficits even faster? Why not return to Clinton spending levels as well? Did he propose this and I missed it?

[J Diddy]

Originally Posted by donkhater

So I guess I'm confused. Why then isn't the Great Obama proposing to return all tax rates to the Clinton levels instead of just the top 2%? Doesn't that reduce deficits even faster? Why not return to Clinton spending levels as well? Did he propose this and I missed it?

The R's want to lower all taxes. He's willing to budge on everything but the top. That's the spin of it.

[Direckshun]

Originally Posted by donkhater

So I guess I'm confused. Why then isn't the Great Obama proposing to return all tax rates to the Clinton levels instead of just the top 2%? Doesn't that reduce deficits even faster? Why not return to Clinton spending levels as well?

Clinton had the benefit of a smooth economy.

Obama inherited the Great Recession. Naturally, his purported tax policies will be more conservative.

[Direckshun]

Despite the hate, both sides agree that Boehner's proposal is a step in the right direction to thwart the fiscal cliff.

http://www.huffingtonpost.com/2012/1...n_2234665.html

Fiscal Cliff Talks: Progress Quietly Begins As Both Sides Make Opening Bids
Posted: 12/03/2012 8:04 pm

WASHINGTON -- Dire headlines about the ongoing "fiscal cliff" debate might give the impression that the country is destined for a harrowing economic jolt. But buried in the stories and slightly visible behind the public posturing, signs are emerging that a deal is possible.

House Republican leaders on Monday presented a plan to the White House that included an extension of all the Bush tax cuts, steep changes to Medicare and large cuts to mandatory and discretionary spending. The White House promptly rejected it as a stale GOP wish list that would hurt the middle class.

In private, however, both sides sounded decidedly more optimistic. The Republican offer provides negotiators with a framework to match the one presented by President Barack Obama's administration last week. And while the two presentations are dramatically different, negotiators can now begin trading bits and pieces in hopes of finding a resolution before the end of the year.

A top administration official agreed that Monday represented a "measure of progress," adding the belief that the president has significant leverage to move the House GOP off of its proposal. Similarly, a top House Republican aide said it is “definitely” progress that the White House and GOP leaders have now put forward opening bids, saying the administration still has retreat from its “absurd and ridiculous” starting point.

"Everybody in Washington knows there's certain choreographed steps that you have to go through when you have to get a deal, and part of that is the public admonitions of the other side," said the GOP aide. "But we don't want to take us off the cliff. We do want a deal."

Though neither side would offer much detail about concessions they would be willing to make, the hypothetical next steps in the negotiating process aren't difficult to envision. The House GOP, for example, has offered that any deal include a change in the way the inflation is measured. Republicans may be forced to drop that idea as it violates the president’s pledge to consider reforms that would affect Social Security outside of the fiscal cliff negotiations. A separate GOP proposal to raise the eligibility age of Medicare may be more palatable to Obama -- so long as it is done over the course of several decades -- as he agreed to something similar when he and House Speaker John Boehner (R-Ohio) attempted to negotiate a grand bargain in the summer of 2011.

The White House has chips to give up itself. It has called for additional stimulus spending -- a request that could meet the chopping block in subsequent negotiations. The president has also asked Boehner to cede full control of the debt ceiling, a congressional power with which the speaker likely will not part. Several congressional Democratic aides predicted that provision would be sacrificed by the White House.

An agreement will require each side to massage bruised feelings from their respective bases, aides said. The difficult task will remain bridging the divide over tax rates. A top Senate Democratic aide, who expressed optimism following the GOP's letter to the president, said "a deal can fall into place very quickly” if Republicans "rip the Band Aid off on tax rates." Democrats also insist that if Boehner ends up keeping authority over the debt ceiling, he at least must pass a bill to raise the ceiling as part of the final deal.

Some senators who are part of the bipartisan "Gang of Eight," which has been working on its own ideas based largely on the Simpson-Bowles plan, said they saw the competing offers as a sign of progress as well.

"It is," said Sen. Saxby Chambliss (R-Ga.), calling Boehner's proposal "exactly in accord with the philosophical position of the Gang of Eight."

Sen. Kent Conrad (D-N.D.), another member of the group, said the GOP proposal was not big enough or balanced enough with revenue, but acknowledged that “it's another step along the way, and hopefully it can be built upon to get to a conclusion that would be more balanced and bigger.”

Still, the provisions may very well end up proving too difficult to reconcile for the primary negotiators. Democratic insiders raised several red flags about the GOP offering.

"This proposal contains no new concessions from the Republicans," said a Democratic leadership aide, who was not permitted to speak publicly about negotiations. "It is a Republican wish-list, just like the president’s opening position represented his ideal scenario. The difference is, the election showed the public prefers the president’s approach."

The aide pointed to four problems Democrats have with the offer, first arguing that "it doesn’t admit reality on tax rates – in fact, it envisions a rate cut for the wealthy."

Democrats, Obama and even the original Simpson-Bowles deficit reduction plan on which Bowles based the proposal that Boehner cited as his inspiration all call for the Bush-era tax rates to expire for the top earners.

Democrats said they also are unhappy that Boehner's offer makes no down payment on deficit reduction right away, and argued that he punts into 2013. They said they see the GOP deal as unbalanced, asking for $900 billion in mandatory cuts, including $600 billion in health care cuts, with only $800 billion in new revenue. Obama is seeking $1.6 trillion in revenue. Democrats also insist the debt ceiling be dealt with.

The Bush-era tax cuts expire at the end of the year, when the budget cuts mandated in last year's borrowing cap negotiations start to kick in. Economists have warned that if both happen, and the country falls off the “fiscal cliff,” it could tip the economy back into recession.

[patteeu]

Originally Posted by Direckshun

Do you know the difference between deficits and debt?

Yes, I do.

[Direckshun]

Originally Posted by patteeu

Yes, I do.

I do not think that you do.

[HonestChieffan]

I think its time to go. Lets hit the cliff.

Its Obamas game after that. Why not?

What is the downside for the country long term? Forget party politics.