Fiscal Cliff Predictions

Thanks for pointing that out, genius. Take out the word "provided" and insert subsidized or controlled or screwed-up. Better?

Not sure how private care is defined if the govt dictates most everything about it, except that the humans that are the actual caregivers or medical professionals aren't govt employees. All this approach does is allow the govt to thoroughly screw up healthcare on many levels, but then claim it's "private care" & therefore the screw-ups must be blamed on the private sector..

I know this is how it works, it is certainly dysfunctional, more now so than ever, and I realize you are trying to assess the situation as it is with a little flair for fun. But, I don't think this is how the framers intended it, a bunch of oligarchs not representing the people but themselves and those who bankrolled them. I repeat:

Perhaps the Republicans don't have leverage, but we the people should. Why would anyone with a triple digit IQ agree to the sunsetting on top earners with only a half-hearted commitment to a commensurate cut in spending that will never happen in reality? So, let's pull revenue forward as we are already doing, fund bloated government spending for a few additional weeks, then strangle small businesses and job creators further, while letting the government continue to pork barrel away. Sounds reasonable to me. Couldn't possibly have a very bad outcome some day in the not-to-distant future? Not to mention, do you really believe that "Clinton-era" rates will be where this stops (we seem to be forgetting about the 3.8% surcharge as well)? Despite Obama's empty rhetoric during his first term that he would cut the deficit in half, it will likely hit @ $22 trillion by 2016. As per what I've been saying and the article posted above, the Fed will be the only bond buyer left.

Does anyone care? Hello, McFly? Staggering the amount owed per taxpayer. Ho hum, out the door for my morning run.

From The Weekly Standard, FWIW:

"A new poll conducted by Politico/GWU/Battleground finds that 76 percent of Americans favor "Cutting government spending across the board."

Fifty-nine percent of Americans registered to vote strongly favor the "across the board" cuts and 17 percent "somewhat" favor the cuts. Only 13 percent strongly oppose "across the board" spending cuts, and 10 percent "somewhat" oppose the cuts. Two percent are unsure.

Sixty-five percent of Americans registered to vote are in favor of greater taxes on corporations, while 33 percent are against them. And only 29 percent favor taxing "small businesses that earn more than $250,000, while 69 percent are against these sorts of taxes.

Additionally, the poll finds, only 37 percent favor "Making significant cuts to the budget of the Defense Department, while 59 percent are against such cuts.

Twenty-three percent of Americans registered to vote believe the "most important problem" facing America is "Government spending and the budget deficit." Twenty-percent selected "the economy."

But, Obama has his "fairness" mandate.

As part of the demand for new stimulus and unilateral control for raising the debt ceiling, I wonder if we can expect more of this? China buying A123. Ah, the law of unintended consequences.

"In October, A123 – which was awarded a $249m grant from the US government – became the latest stimulus-backed company to file for bankruptcy, prompting a fresh round of attacks on President Barack Obama’s support for emerging energy technologies.

The company said it was seeking Chapter 11 bankruptcy protection “to provide for an orderly sale” of its operations and “help maximise the value of its assets for its stakeholders”.

The company had attempted to secure a rescue deal with Wanxiang before it went into administration.

The company had been a flagship of Mr Obama’s attempt to stimulate new environmentally friendly industries but ran into difficulties as a result of slower than expected sales of electric cars.

Its bankruptcy follows that of other companies backed by US government grants or loan guarantees, including Solyndra, a manufacturer of solar modules, Abound Solar, another panel maker, and Ener1, which also makes batteries for electric cars.

A123 did not get a loan guarantee but was awarded the $249m grant as part of the Obama administration’s stimulus in 2009. By the end of June it had drawn down only about $130m of the money because demand for its products was not strong enough to justify additional investment in manufacturing capacity.

It also received grants and tax credits from the state of Michigan of up to $141m."

http://www.ft.com/intl/cms/s/0/f5d46552-4225-11e2-979e-00144feabdc0.html#axzz2EfYIdLjx

No. Not playing the blame game. Government and private sector are both going to be involved in healthcare, so it's worth being aware of the fact that we don't have, and no one proposes, government care in the US.

Otherwise, your viewpoint is predictable and boring. The government always bad, free markets always good dogma = big yawn. There are shades of grey.

figuring out what the problem is - which requires actually wading through the propaganda to get to the truth - before figuring out a solution may be "boring", but it's also common sense - something in very short supply in the healthcare debate.

Interesting that people look to the fed govt to "improve" healthcare - or anything, for that matter. How can we ignore the fed govt's track record & continue to clamor for it to rescue or stimulate some sector of the economy?

The fed govt is the most dysfunctional entity on the biggest scale in the history of the universe. Integrity has been removed from the system, yet I'd argue integrity is critical to the long term success of govt.

Sagarin wrote:

~ wrote:

Econ 101 - Principle of income elasticity of demand.

Paring down the deficit is going to hurt economic growth no matter how you structure it. Decreased spending will lead to decreased production whether contraction comes from the supply side or the demand side. Who ultimately pays for the deficit cuts will depend on the allocation of supply side or demand side contributions.

You're going to tell me about Econ 101 without answering my question? Seriously? Wow, thanks for enlightening all of us.

Haha, I should explain economics to you for my answer to be valid? The principles of elasticity tell us - by definition - that increasing marginal tax rates on the very wealthy will have the least impact on macro economic consumption compared with other options. You sound financially educated so I'm quite sure you're aware of this. If you know of an economic model where this does not occur please let us all in on the secret.

Now, is it positive for growth and investment when taxes increase - of course not. Are there any available policy prescriptions that will reduce the current deficit and not have a negative effect on growth and investment? No. It seems to me this is what you're arguing, and rather admit that some of the policy courses that are being discussed have some merit, you reject them all to support your point. It makes you look willfully ignorant rather than intelligent.

This is the outline of the deal that is taking form:

Now don't faint. This is something we haven't seen for a while. We used to call this compromise.

The car companies and Wall Street companies were doing just fine to just a few years before they went bankrupt. Its not just the Profit and Loss. Its the whole cycle which I just described.

Its taken a turn because I think a lot of us agree that the current fight over the fiscal cliff which is really a fiscal slope is a joke in its narrow mindedness.

I've been arguing for doing nothing rather than continuing the Bush tax cuts. Its just not that big of deal. The only thing I would change is change the child tax credit and education credit to reflect inflation since Clinton was in office. Also do a patch for AMT.

In any case, the payroll taxes and entitlement spending cuts are going to happen in any deal that is made. Or if no agreement is made. Its happening. So middle class working people are screwed anyway. Why should they care about the top marginal tax rate going up on some executive who has to declare millions in income on the bonus compensation they have been deferring for a decade.

Well nothing is not going to happen.

Personally, I will be prepared for it, but most will not. It would seriously hurt to have every single pay check go down right now.

Funny how Bush made the rates temparary 10 years ago to force this situation and put the Republicans in a tough spot.

I'd like to see the payroll tax cut go away and maybe replaced by something else that is more honest in increasing the deficit.

Money that funds social security should come directly from payroll taxes, not mostly from payroll taxes and partly from the general fund, causing an extra general fund expense.

This isn't a cliff. Even if rates go up Jan 1. It's a slow slope, they can still finish it sometime in Jan/Feb with minimal impact on daily lives.

Of course that doesn't draw in viewers to MSDNC, FAUX news, or CNN. So it's a scary and terrible cliff that we'll all fall off and die.

If a deal stalls until Jan 12th, or there about, then every American earning a paycheck will see their take home income decrease by 2-4% on Jan 15th. Everyone in the workforce. That's correctable, but it is not a welcome outcome. This is on top of $120 billion in decreased spending passed last year in the debt-limit negotiations. I wouldn't be so quick to just shrug this off as media hype.

I just showed you how Americans will not be any worst off and reduced reduced deficits will make them better off in the longer term. Moreover, I think the bulk of Americans finally get it. The 08' financial crises was a breaking point. For decades now there has been the promise that if we cut taxes on investment and lower marginal tax rates that everyone would benefit. Americans waited for a generation and in 08' they realized its not going to happen. And they are right. Social Security is fine and it can afford a tax cut. As I explained in an above post, it suffers from inflation that SS beneficiaries never asked for or caused. On top of that it suffers from businesses dodging payroll taxes by sending jobs overseas or paying under the table. One of the worst political decisions in modern history was in 1981 when we raised payroll taxes on people's jobs. We need to reverse one of the major tax increases Reagan signed into law. And if you are not going to do that, than Social Security sure as hell is not going to benefit from cutting other taxes used to pay the $5+ trillion dollars to pay what is owed the SS trust fund.

X-Runner wrote:

Well nothing is not going to happen.

Personally, I will be prepared for it, but most will not. It would seriously hurt to have every single pay check go down right now.

Funny how Bush made the rates temparary 10 years ago to force this situation and put the Republicans in a tough spot.

I'd like to see the payroll tax cut go away and maybe replaced by something else that is more honest in increasing the deficit.

Money that funds social security should come directly from payroll taxes, not mostly from payroll taxes and partly from the general fund, causing an extra general fund expense.

ingenius wrote:

If a deal stalls until Jan 12th, or there about, then every American earning a paycheck will see their take home income decrease by 2-4% on Jan 15th. Everyone in the workforce. That's correctable, but it is not a welcome outcome. This is on top of $120 billion in decreased spending passed last year in the debt-limit negotiations. I wouldn't be so quick to just shrug this off as media hype.

For those in the lower end (I make ~$40k/year) that's not terrible, it'll cost me $30 in the first two weeks, or $60 in the first month. That's not something I'd like, but if you're living paycheck to paycheck and can't afford a hit like that then you have bigger fish to fry than a fiscal cliff.

For those earning less the hit is less and those earning more have large enough incomes that a $40-50 hit really isn't going to break their back.

This of course can all be corrected when the deal is reached.

Would it suck? Yes.

Is it the end of the world....no

First off, your math is a bit short. A 2% increase in the payroll tax and at least a 1% increase in your effective income tax rate is going to cost a guy with your income $100 for one month.

Secondly, while $100 isn't going to send you into a life on the streets, the cumulative effect of everyone having $100-$500 less each month, for even one month, will have noticeable effects on the economy. Corporate managers don't just wait until sales dip to adjust production. Neither do analysts in the stock or bond markets. Without action before Jan 1, these changes will be priced into the markets before you see your smaller check.

On the bright side, is this good for deficit reduction? On a long term basis it probably is.

It also costs companies lots of money to 1) not know what the rates/rules are for 2013 and 2) have them change mid-year. So not so simple as rates go up or down - the volatility hurts too.

how was the '08 crisis related to tax rates?? It was simply a response to horrible policy that generated a housing bubble that burst. If tax rates under GWB were ineffective, why was fed tax revenue so high?

First of all, the 08' crises wasn't related to tax rates. It was about Wall Street executives making millions of dollars per year running their businesses into the ground. Therefore, what is the big deal if tax rates revert back to Clinton era levels?

Secondly who says fed tax revenue was high considering the loose Fed policy, government spending, deregulation during the Bush era? Federal tax revenue didn't increase that much and obviously proved unsustainable. Remember, the era of the Bush tax cuts includes the Obama administration right up to the present day.