Is it a fiscal cliff or merely a bump in the road?
by Linda Beale
Is it a fiscal cliff or merely a bump in the road?
Sixty percent of American voters in exit polls indicated that they supported higher taxes for the wealthy, see here. Even some arch conservatives are acknowledging that some tax increases won’t do terrible harm. Id. (noting that the Wall Street Journal’s Stephen Moore acknowledged that Obama “can claim that he’s got a voter mandate to do that [raise taxes on the rich].” Even Conservative Weekly Standard Editor Bill Kristol counseled Republican leadership to get real.
You know what? It won’t kill the country if Republicans raise taxes a littlbe bit on millionaires. It really won’t, I don’t think. … Really? The Republican party is gonna fall on its sword to defend a bunch of millionaires, half of whom voted Democratic, and half of whom live in Hollywood and are hostile to Republicans? Nicole Flatow, Weekly Standard Editor Bill Kristol: Raising Millionaires’ Taxes ‘Won’t Kill the Country’, ThinkProgress (Nov. 11, 2012).
Nonetheless, the House and Senate Republican leadership (Rep. Boehner and Sen. McConnell) are insisting that they will not allow tax rates to rise. McConnell told Breitbart.com the following:
One issue I’ve never been conflicted about is taxes. I wasn’t sent to Washington to raise anybody’s taxes to pay for more wasteful spending and this election doesn’t change my principles. This election was a disappointment, without doubt, but let’s be clear about something: the House is still run by Republicans, and Republicans still maintain a robust minority in the Senate. I know some people out there think Tuesday’s results mean Republicans in Washington are now going to roll over and agree to Democrat demands that we hike tax rates before the end of the year. I’m here to tell them there is no truth to that notion whatsoever. Annie-Rose Strasser, Senate Minority Leader: We Won’t Raise Taxes At All, ThinkProgress (Nov. 9, 2012).
President Obama Friday invited Congress to sign off on a tax cut for the middle class right away– noting that just extending the Bush tax cuts for those who make less than $250,000 would give a tax cut to 98 percent of Americans and 97 percent of small businesses.
“While there may be disagreements in Congress over whether to raise taxes on people making *over* $250,000 a year, nobody — not Republicans, not Democrats — want taxes to go up for folks making under $250,000 a year,” Obama said. “So let’s not wait.” Adele M. Stan, Obama throws down gauntlet on fiscal cliff, Salon.com (Nov. 10, 2012).
Robert Reich, now at the University of California at Berkeley, writes that the game of chicken is on.
So who blinks first? Democrats who don’t mind going over the cliff because they’ll get a better final deal – and the deal will be retroactive to January 1st so it’s not really a cliff at all but more like a little hill? Or Republicans who want to extend the Bush tax cuts beyond January 1st, until we get sufficiently close to the debt ceiling that they can once again threaten the full faith and credit of America?
As I said before, I had naively assumed the election would put an end to these games, but obviously not. Yet Obama and the Democrats are holding most of the cards now. Let’s hope they use them. Robert Reich, Get ready for an economic game of chicken, Salon.com (Nov. 9, 2012).
cross posted with ataxingmatter
On Up with Chis Hayes, he coined the “fiscal curve” because everything does not kick in the moment the clock strikes midnight. Also, it’s a congressional thing which means they can undo it at any moment.
On Young Turks last night his guest (sorry don’t have the name) noted how odd it is. We don’t want austerity that is the “fiscal cliff” so we are going to solve that by doing cuts to government spending at a ratio of $2.50 cut to $1.00 revenue raising…in other words: Austerity.
We are such a sick minded country: http://www.angrybearblog.com/2010/01/americas-governance-mind-fubar.html
Obama COULD cross his arms and stride forthrightly over the Fiscal Cliff, rubbing out the Bush tax cuts for everybody. Then, after a month or two, he might have a press conference and say something like “These are the tax changes I originally proposed, but they were rejected in the House. If you’d to see your taxes fall in the next few years, please discuss this with your Republican representative.”
What am I missing?
Mike, I do not think you are missing anything, but I would not hold your breath waiting for Obama to do anything that sensible. Instead he will voluntarily try to get a further raise in the age for full social security benefits, change the way that cost of living is indexed for social security, maybe means test social security and heaven knows what he will do to medicare and medicaid all to craft a grand bargain with folks who have proven that they are terrorists bent on destroying America if necessary to get their way.Personally, I think the cutoff should be to restore the Bush tax cuts only for couples making less than $100K a year and individuals making less than $75K a year and the only net spending cuts should come from defense. Now if he wants to take some money from EPA and give it to Education or some money from the Chamber of Commerce and give it to rebuilding bridges or sewers or railroads, fine, but the only way they will ever get the deficit under control is to get the unemployment rate down and if business will not employ people in this country than the government has to do it.
40% of US government outlays is for discretionary things, the austerity bomb does not cut that enough.
More than 20% of outlays is for war, three times what the OEDC spends, the austerity bombs does not cut that enough.
Between Bush wars and tax cuts the defict exploded.
No one is talking enough tax increases nor cuts to war.
The austerity bombs is not enough, but the very serious deficit con artists only want the austerity bomb to effect “entitlements”.
“Entitlements” did not cause the debt problem.
And if there were not a huge unnecessary Bush debt burden pending demographics would not be a problem.
If rates go up on top earners it will probably have a negligible effect on the economy.
The more important thing is to prevent spending cuts, and prevent any changes/cuts to SS, medicare/medicaid.
If raising taxes on the rich comes with a tradeoff of cuts to anything – then let the rich eat their cake if that is the best way to prevent cuts.
My fear is trading cuts for higher taxes on the rich. In that scenario you have actually taken two steps backwards.
Mcwop: My fear is trading cuts for higher taxes on the rich. In that scenario you have actually taken two steps backwards.
I agree. What is it about cutting $2.50 for every dollar raised? Why the dog and pony show? Does Obama et al believe the public will see this as a more balanced approach vs just cutting for a $1.50 and not raising the taxes?
Obama et al must believe that such an obvious sales job (as in used car saleman) on the public is possible. As far as I can tell, the public is seeing the used car for what it is: a screwing.
I’m getting real tired of the words “a little bit” when talking about raising taxes on the wealthy. Using “little” can only mean the wealthy are not going to experience the “balance” which within the formual of $2.50 for $1.00 I can find on “balance”; just a ratio. And the ratio is not leaning my way.
Yes Daniel, and if you do the math on $1 traded for $2.50, that actually works out to a $3.50 drain on net financial assets from the economy. The lower income folks totally get screwed.
“Let’s hope they use them…” Sure sure. More hope.
But a handicapper would look at McConnells track record, compare it to Bogama’s and put the rent money on the GOP.
Somewhat OT but I keep wondering if this administration is actually some kind of post modern test of people’s cynicism. No matter how cynical you get about this team it’s never enough. They continue to surprise.
But hey Forward to the next surprise. Or grand bargain. Whatever.
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Thanks McWop and others.
The R’s would be willing to accept tax increases if it got their foot in the door to killing Social Security.
They will moot the tax increases one way or another, but once SS is bleeding, no one will save it.
This is one thing wrong with the “tax the rich” mindset.
SS can be “fixed” (meaning the projected shortfall can be eliminated) by raising the “tax” (insurance contribution) of workers about eighty cents per week each year for about fifteen of the next twenty years (further, smaller, fixes might be necessary after that but they would never add up to less money for workers after paying the increased tax).
Fixed in this way it should end the lie that SS is broke, that it creates deficits, or is a huge burden on the young.
Then the politicians can go back to their games about taxes… which have nothing to do with SS, except at a Trojan Horse to kill it.
A 2 or 3 line tax bill should do it. Step one. The current tax code is extended or made perminent. Step two. Repeal the two paragraphs in the AMT section that give dividends and capital gains preferential treatment (i.e. eliminate page two of form 6251).
The old Confederate and Mountain states would go along because it mostly effects tax payers in Democratic strong holds (CA, NY, CT, MA, etc.). For an added bonus set the AMT rate at 28% for the flat tax advocates.