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

[Direckshun]

Meanwhile, Medicaid is seemingly off the table.

http://thehill.com/homenews/senate/2...d-out-of-talks

Liberals: Leave Medicaid out of talks
By Sam Baker
12/11/12 07:28 PM ET

Liberals are intensely — and successfully — pressing the White House to take Medicaid off the table in deficit-reduction talks.

Republicans have insisted on entitlement cuts in exchange for higher revenues in a deal to avoid the “fiscal cliff,” a combination of tax increases and automatic spending cuts set to take effect at the end of the year.

Congressional Democrats oppose almost all cuts to Medicare, Medicaid and Social Security, but they’re taking an especially hard line against Medicaid cuts, including proposals President Obama has supported in the past.

“If you want to boil it down to one message: Keep your hands off the Medicaid program,” Rep. Henry Waxman (D-Calif.) said. “We don’t believe in cutting Medicare, either, but whatever they talk about in Medicare, maybe there’s some things we can live with. But we cannot live with any cut to Medicaid.”

Sen. Jay Rockefeller (D-W.Va.) was scheduled to talk to White House Chief of Staff Jack Lew and Treasury Secretary Timothy Geithner on Tuesday afternoon to make clear that Medicaid should not be touched in a fiscal-cliff agreement.

Rockefeller said Obama could lose Democratic support by agreeing to cut the program.

“He knows where we are, and he knows we’re not kidding,” Rockefeller said. “And he knows that in many cases our votes are at stake.”

He said all entitlements should be protected, but that Medicaid is his top priority.

“We’re not budging on Medicare, we’re not budging on Medicaid — Medicaid above all, because it’s the unknown. It’s the one people don’t talk about,” Rockefeller said at a press conference Tuesday. “AARP always talks about Medicare. They make a lot of money off that. They don’t make much off Medicaid.”

Medicaid isn’t as politically galvanizing as Medicare, which both parties are leery of discussing after a bruising round of attacks during the campaign season. Medicaid primarily serves the poor, but it’s also a major provider of long-term care, such as nursing-home stays, as well as benefits for children and people with disabilities.

It’s also a cornerstone of Obama’s signature healthcare law, and that has helped push the White House away from significant cuts.

Medicaid was initially set to cover about half of the 30 million people expected to gain coverage under the Affordable Care Act. That number will fall, though, as a result of the Supreme Court decision making the Medicaid expansion optional for states.

That ruling has changed the dynamic for Medicaid cuts, liberals argue. Now that the administration must coax states into the Medicaid expansion, they say, it shouldn’t be endorsing other Medicaid cuts that would shift more costs to the states.

“I think the president and the administration understand that Medicaid cannot be cut, even along the lines of what was under consideration a couple of years ago,” Waxman said last week. “It would lead a lot of states to feel uncertain about whether they’re going to have the money they need to take on this extra load with Medicaid, and therefore some states may be more hesitant.”

The White House ultimately agreed.

On Monday, the Health and Human Services Department announced that the administration no longer supported one of its own proposals to cut Medicaid spending. Obama’s fiscal 2013 budget had proposed streamlining the various calculations that determine how much the federal government will contribute to each state’s Medicaid program.

The so-called “blended rate,” also floated in earlier debt talks with Speaker John Boehner (R-Ohio), would have saved the federal government roughly $18 billion.

The administration acknowledged that the Supreme Court’s healthcare ruling had changed the political landscape.

“The Supreme Court decision has made the higher matching rates available in the Affordable Care Act for the new groups covered even more important to incentivize states to expand Medicaid coverage,” HHS said as it retracted its support for the idea.

But the blended rate is hardly the only idea in Obama’s most recent budget that shifted Medicaid costs to the states rather than actually reducing them. The budget also sought to limit complicated taxes that states use to boost federal Medicaid payments.

A White House spokesman did not respond when asked whether the administration still supports that measure.

Taking Medicaid cuts off the table because they threaten to undermine the Affordable Care Act could put more pressure on other entitlements.

Boehner has set an aggressive target of $600 billion in healthcare cuts in exchange for about $800 billion in new revenues, but Democrats are also opposed to changes in Medicare and Social Security.

Rep. Jan Schakowsky (D-Ill.) said negotiators need to understand that cuts to one program aren’t necessarily isolated, citing as an example the small but expensive group of seniors who receive both Medicare and Medicaid benefits.

“All these programs that serve the same person have to be looked at as a whole,” she said.

Senate Majority Leader Harry Reid (D-Nev.) has said Social Security should be off the table in fiscal-cliff talks, and liberals have rallied strong opposition lately to raising the Medicare eligibility age — a proposal that would save the federal government roughly $113 billion, according to the Congressional Budget Office, while raising the cost of healthcare for some retirees.

Waxman said Tuesday that he still opposes raising the Medicare age, and he also opposes further raising premiums on wealthy recipients. Asked which Medicare cuts he might be able to “live with,” he said he did not want to negotiate in public.

“I’ll see what the proposals are and I’ll evaluate them. But I’ll say one thing: No reductions in Medicaid,” he said. “It would be unthinkable. It would hurt the Affordable Care Act’s success. And it would be a real threat to people who are really vulnerable.”

[Direckshun]

This is why Nancy Pelosi isn't involved in budget talks: she would take raising the Medicare eligibility age completely off the table, according to her very own op-ed.

Though I do agree with her conclusions:

The idea of raising the Medicare age is central to the Republican proposal. There's just one critical problem: It doesn't work. It doesn't have public support. It's unfair. And it doesn't lower health expenditures.

[Direckshun]

Forbes drops a huge piece of the obvious.

http://www.forbes.com/sites/davidmar...?partner=obinv

The Fiscal Cliff Is Almost Everything the Democrats Want
David John Marotta
12/09/2012 @ 12:43AM

The so-called fiscal cliff is a series of tax increases and spending cuts bundled into a name to scare people and serve political ends. It is a crisis fabricated 100% by politicians. And avoiding the fiscal cliff is being used hypocritically for additional political gain.

The Democrats prefer much of what the fiscal cliff would mean. They want tax increases in general, specifically on high earners. They campaigned on raising taxes on those in the top two brackets. They act as though the resulting tax increase on the middle class will be catastrophic. But they also argue that these are the tax rates in force during the Clinton administration when the economy did just fine.

During the Clinton years, spending was under control. Regulations were less oppressive. And most importantly, average corporate tax rates around the world were higher than the United States. Since then the world has cut more than we have and left the United States with the highest marginal corporate tax rate in the world.

Obama claims tax increases on the middle class may cause a recession. He has said the taxes on a family of four will go up by $2,200. Meanwhile taxes for those earning over $500,000 will rise $119,878. And those earning over $200,000 will pay an extra $39,880. Obama would have you believe that $2,200 is a fiscal cliff, but $119,878 is just paying their fair share.

Tax hikes on the poor and middle class are minuscule compared to the increases on the most productive small business owners. These are increases in income tax, not wealth. It isn’t even right to say they are tax increases on the rich. Being rich is measured by how much wealth you have, not how much income. It is more accurate to say these are tax increases on the most productive members of society.

Taxes on the most productive often mean taxes on small business owners whose profits flow naturally onto their personal tax returns. These entrepreneurs are the 1 in 20 people who employ the other 19. They use the profits from one business to start another. Most of these expansions cannot be expensed. They require tax to be paid before outlays can be made. Decreasing their profit means fewer investments made in hiring and economic expansion.

Taxing the most productive an additional $119,878 will have a larger impact on the middle class than an additional $2,200. Having a job is more important. Having an appreciating 401(k) retirement fund is more important. And having a growing economy is more important.

The Democrats are using tax increases politically to continue promoting the populist message that the deficit can be solved by tax hikes on the rich rather than spending cuts.

I’ve written in the past few weeks to show that the top cumulative marginal tax on dividends is rising to 74%. And that the rise in the top marginal tax rate on capital gains will stop the flow of capital out of one investment and into another. Obama has repeatedly endorsed these parts of the fiscal cliff.

The second part of the fiscal cliff is the spending cuts that will come about as a result of the sequestration agreement. They include reductions in defense spending that the Democrats have long favored. And they also include paying doctors 30% less for Medicare without any accompanying reduction in the benefits that patients receive.

Much of Obamacare is predicated on the idea that when single payers can negotiate prices, they can dictate whatever payment they want and therefore reduce costs. This monopolistic idea could be put to the test if these Medicare pay cuts are enacted. What’s wrong with paying those rich doctors 30% less for Medicare?

In reality, it doesn’t punish rich doctors but rather those productive physicians who provide valuable services for Medicare patients. Medicare reimbursement is already pathetically low compared to other payments. Many doctors do not accept Medicare patients now. Given an additional 30% reduction, many more will opt out of participating in Medicare.

The fiscal cliff is the platform on which Obama ran for reelection. It includes huge tax hikes on those with high incomes. It demands massive defense spending cuts. And it means paying doctors 30% less for Medicare without reducing any of the benefits. In short, it is the utopian planning world liberals have always wanted. Meanwhile the president’s proposal suggests $50 billion in additional spending and $1.6 trillion in new taxes.

If Congress would just abolish the debt ceiling entirely, we could sail off to Greece.

We are approaching the debt ceiling again. And Democrats are pushing for its permanent removal. But the debt ceiling is the only leverage that Republicans in the House have left to force fiscal responsibility on their spendthrift rivals.

[FD]

Originally Posted by Direckshun

Why aren't the Republicans suggesting any specific spending cuts?

Because Republicans, as it turns out, actually hate spending cuts.

If ever there were a party without a sense of direction, it's the Republican Party in late 2012.

http://www.businessinsider.com/fisca...oehner-2012-12

There's Not A Single Spending Cut That Republican Voters Support
Brett LoGiurato
Dec. 11, 2012, 8:51 AM

The "compromise" in the fiscal cliff deal from Democrats is supposed to come in the form of spending cuts. But a new Marist-McClatchy poll shows that voters — including Republicans — oppose any and every specific spending cut proposed to them.

It goes hand in hand with the disparity between voters' wish for blanket "spending cuts" and their opposition to any cuts to an entitlement that benefits them.

A look at what Republicans oppose:

• By 47-37, letting the Obama payroll tax cut expire.
• By 68-26, cutting spending for Medicare.
• By 61-33, cutting spending for Medicaid.
• By 66-28, eliminating the tax deduction for home mortgage interest.
• By 72-25, eliminating the charitable tax deduction.
• By 56-44, raising the Medicare eligibility age from 65 to 67.

Republicans don't favor much in any potential deal — they also, of course, are opposed to allowing the Bush tax cuts to expire on any income bracket. Pollster Lee M. Miringoff warns that they might be unhappy with whatever happens.

“There’s no clear statement of what Republican voters want to happen. There’s opposition to everything,” Miringoff said.

“If you’re a Republican in Congress looking for what Republican voters are telling you, they’re not telling you much."

Polls consistently show this, and its the thing that bothers me the most. If Republicans don't support smaller government, what is it they do support?

[King_Chief_Fan]

Originally Posted by Direckshun

Why aren't the Republicans suggesting any specific spending cuts?

Because Republicans, as it turns out, actually hate spending cuts.

If ever there were a party without a sense of direction, it's the Republican Party in late 2012.

http://www.businessinsider.com/fisca...oehner-2012-12

There's Not A Single Spending Cut That Republican Voters Support
Brett LoGiurato
Dec. 11, 2012, 8:51 AM

The "compromise" in the fiscal cliff deal from Democrats is supposed to come in the form of spending cuts. But a new Marist-McClatchy poll shows that voters — including Republicans — oppose any and every specific spending cut proposed to them.

It goes hand in hand with the disparity between voters' wish for blanket "spending cuts" and their opposition to any cuts to an entitlement that benefits them.


A look at what Republicans oppose:

• By 47-37, letting the Obama payroll tax cut expire.
• By 68-26, cutting spending for Medicare.
• By 61-33, cutting spending for Medicaid.
• By 66-28, eliminating the tax deduction for home mortgage interest.
• By 72-25, eliminating the charitable tax deduction.
• By 56-44, raising the Medicare eligibility age from 65 to 67.

Republicans don't favor much in any potential deal — they also, of course, are opposed to allowing the Bush tax cuts to expire on any income bracket. Pollster Lee M. Miringoff warns that they might be unhappy with whatever happens.

“There’s no clear statement of what Republican voters want to happen. There’s opposition to everything,” Miringoff said.

“If you’re a Republican in Congress looking for what Republican voters are telling you, they’re not telling you much."

Liberals: Leave Medicaid out of talks
By Sam Baker
12/11/12 07:28 PM ET

seems like the repubs aren't the only ones

[Direckshun]

Yet another reason Republicans have no idea what they want to do: thanks to the deficit deal in 2011, they really have no where to go from here but Medicare, which violates their rhetoric from the 2012 campaign to older whites.

http://www.washingtonpost.com/blogs/...-they-can-get/

The GOP’s problem: The cuts they want aren’t the cuts they can get
Posted by Ezra Klein
on December 13, 2012 at 10:04 am

This is a very sharp point by Josh Barro:

The Republicans’ main problem in this negotiation is that they know President Barack Obama will not agree to cut in the area they want to cut: aid to the poor. The signal Obama has sent is that he is willing to make a deal that cuts old-age entitlements, meaning Medicare and Social Security, and Republicans are internally conflicted over those programs.

He’s right. Think back to Mitt Romney’s proposed budget. Medicare and Social Security were held harmless for at least 10 years. Defense spending got a lift. PBS and the National Endowment for the Arts were on the table, but they cost so little it hardly mattered.

The only big cuts Romney ever proposed were to programs that aid the poor. He wanted to block grant — which is to say, sharply cut — Medicaid, food stamps, and housing assistance. He wanted to get rid of the tax cuts enacted in the stimulus to help the poor — that’s why his tax plan actually raised taxes on the poorest Americans. He wanted to repeal all the spending in Obamacare, most of which goes to lower-income Americans.

Those cuts still wouldn’t have been enough to make Romney’s budget add up. But they nevertheless would’ve been big cuts. And they were the only ones Romney proposed for the next decade. Nor was Romney a major outlier on this: About two-thirds of the cuts in Rep. Paul Ryan’s budget came from programs for the poor.

These are, however, classes of cuts the White House won’t even consider. A year ago, they were open to modest cuts in Medicaid, but after the Supreme Court’s health-care decision, even that door has shut. As for discretionary spending cuts, so many of those were made in 2011, there’s just not much left to do.

That leaves Medicare and Social Security. It’s possible that the negotiators will enact a backdoor, but significant, cut to Social Security by changing the government’s measure of inflation. But they’re not going to come at Social Security from the front. It’s too politically potent. Even Ryan’s budget left Social Security alone.

As for Medicare, as Barro says, if “Republicans ask for near-term Medicare cuts, that will mean reversing a position that is popular with a core constituency (old white people) and giving up a cudgel that they feel they have used effectively to beat up the president since 2009.” It’s a pickle.

[patteeu]

Why are we talking about what Romney campaigned on? I thought he lost the election. Maybe we should be reviewing the promises the winner made instead.

[Bo's Pelini]

This would be a lot easier if 1/3 of the Republican party would go back to the Democratic party where they came from.

[BucEyedPea]

Originally Posted by Bo's Pelini

This would be a lot easier if 1/3 of the Republican party would go back to the Democratic party where they came from.

[mlyonsd]

Originally Posted by patteeu

Why are we talking about what Romney campaigned on? I thought he lost the election. Maybe we should be reviewing the promises the winner made instead.

The problem with that is the winner has no plan or clue. He's got people thinking deficits don't matter and all of a sudden a monkey will show up with money flying out of it's butt.

But the biggest problem is we have a media that completely buys into the emperor with no clothes.

[petegz28]

Originally Posted by Direckshun

This is why Nancy Pelosi isn't involved in budget talks: she would take raising the Medicare eligibility age completely off the table, according to her very own op-ed.

Though I do agree with her conclusions:

The same could very well be said about Obamacare and the 400k jobs she said it would produce at it's signing that never came around.

[patteeu]

Originally Posted by mlyonsd

The problem with that is the winner has no plan or clue. He's got people thinking deficits don't matter and all of a sudden a monkey will show up with money flying out of it's butt.

But the biggest problem is we have a media that completely buys into the emperor with no clothes.

Very true. So instead of focusing on how the loser's pronouncements (which are irrelevant now) might not have added up to a complete solution to the looming fiscal problems we face, we ought to be recognizing that the winner's pronouncements (to the extent there were any) were even less serious and more inadequate.

[BucEyedPea]

Originally Posted by mlyonsd

The problem with that is the winner has no plan or clue. He's got people thinking deficits don't matter and all of a sudden a monkey will show up with money flying out of it's butt.

But the biggest problem is we have a media that completely buys into the emperor with no clothes.

You mean as in Flying Monkeys?

[Pitt Gorilla]

http://www.cnbc.com/id/100307516

Obama Has 'Mandate' to Increase Taxes on Wealthy: Poll

A strong majority of Americans wants the two political parties to compromise to avoid the "fiscal cliff," and most back President Barack Obama's prescription for doing so, according to a new NBC News/Wall Street Journal poll.

By 65 percent to 28 percent, respondents to the survey preferred that political leaders compromise to reach a deal—even if that means tax increases and cuts in Social Security and Medicare—rather than stick to their positions and allow across the board tax hikes and spending cuts on Jan. 1. The telephone survey of 1,000 adults, conducted Dec. 6-9, carries a margin for error of 3.1 percentage points.

But on the specific measures that might be part of a compromise, public opinion favors Obama's views. Fully 68 percent said Obama "has a mandate" from the November election to cut taxes on families earning less than $250,000 per year; 65 percent said he has a mandate for "increasing taxes on the wealthy and reducing federal spending."

Some 59 percent said Obama has a mandate to eliminate the Bush tax cuts on incomes above $250,000. And an overwhelming 76 percent said that higher tax rates on incomes that high would be an "acceptable" element of a compromise to avoid the fiscal cliff.

In part, those assessments reflect the traditional afterglow that presidents enjoy after winning re-election when partisan attacks taper off. The poll shows Obama's job approval rating, which never stood higher than 50 percent earlier this year, now at 53 percent.

It also reflects the weak standing of the Republican Party and its leaders. Just 19 percent of Americans express a positive view of House Speaker John Boehner, while 29 percent express a negative view.

A month after Obama defeated him, Mitt Romney is rated positively by 35 percent, while 44 percent rate him negatively. His running mate, House Budget Chairman Paul Ryan, is rated positively by 30 percent and negatively by 34 percent.

The GOP itself suffers from long-term damage to its reputation. While Americans rate the Democratic Party positively by a 44 percent to 35 percent margin, Republicans fare much worse: 30 percent positive, 45 percent negative.

Republican pollster Bill McInturff, who conducts the NBC/WSJ survey with his Democratic counterpart Peter Hart, noted that Republicans have suffered a net negative rating in every NBC/WSJ survey for six years except for a single poll just after 2010 mid-term elections. Republicans enjoy a positive reputation with only two groups within the electorate: white Southerners, and residents of rural areas.

—By CNBC's John Harwood; Follow him on Twitter: @JohnJHarwood

[Direckshun]

The tax hikes Obama suggested are like a third of the fiscal cliff's.