Fiscal Cliff Negotiations

I looked back several pages but saw no thread on the looming fiscal cliff, or the fiscal "hill" as some are calling it. I am interested to hear everyone's thoughts on the fiscal cliff with regards to what you would like to see included in the legislation and how you think the final bill will effect economic growth.

Personally, I believe that the final bill will include roughly 1.2 trillion in increased revenues which will be achieved through closing loopholes and deductions as well as a moderate rate increase on the top marginal rates; somewhere in the neighborhood of a 2% increase (from 35% to 37%). On the spending cut side I look for around 2.8 trillion in cuts, primarily achieved by reducing military spending as well as medicare and medicaid spending. I am not affluent enough with the situation to provide deeper details but I expect the final framework to look something like this.

Further, and perhaps more importantly, I expect to see economic growth take on a better trajectory after the deal is finalized. In an open letter to congress before the election, CEO's from 80 of the largest corporations, signed onto a balanced deal that included new revenues as well as spending cuts and went on to say that they are ready to start hiring and investing again if the government can inspire some confidence with such a "grand bargain." In recent days and weeks I have seen many of these corporate execs on the talking head shows reiterating their desire to move forward once a deal is struck.

To be clear I do not expect a robust recovery a month after a deal is signed but I do expect that we will be well on the path to something that we will all "feel." As a small business owner I am excited by the prospect of getting back to more profitable times.

 

Jump off the edge would be nice.

The whole notion of "Blame the Rich they should Pay" is crap.

The system is f'd from within and the general public really doesn't give sh!t. They just want someone to blame but themselves.

 

I don't think anyone is blaming the rich but the Bush Tax Cuts were supposed to be temporary. There is no question that the combination of the Bush Tax Cuts, Afghanistan, Iraq and Medicare Part D put us into this hole; regardless of whether part of those were justified or not. Ending the wars and rescinding at least part of the Bush Tax Cuts will go a long way toward righting the ship. Not to mention the cuts that need to be made to medicare/medicaid and military spending. Asking the wealthiest to forego 2-3% in additional taxes on their income OVER $250,000 isn't too much to ask.

How would you prefer for us to close the current budget deficit?

 

I think the blame for not getting a deal done was on the republicans last year. They were being ridiculous about increased revenue. They seem to have come to their senses but now they have no leverage. Obama has dug in and I don't think he will accept a deal like the one you outlined. We'll see. It should be interesting. One thing I definitely think is that there will be no deal by January 1.

 

I sure hope you are wrong, Mobius. I think both sides would be foolish not to make a deal considering the chatter from the business world about them being ready to take their money off the sidelines. That said, we are talking about Washington here. I also hope they don't do something like reach a small deal and kick the can down the road for further negotiations, which IMO would continue to hamstring the economy.

 

It seems Obama will not budge on rates which is profoundly stupid. Marginal rates mean little. Effective rates matter, and the Republicans are willing to negotiate on closing deductions which will raise effective rates.

I hope some real spending cuts come to fruition, but from what I have read ALL deficit reduction is coming from the proposed revenue increases. This is very frustrating.

I calculated my taxes as if no deal were reached, and I will see a 400% increase in my taxes. Scary. I think most middle income Americans with multiple kids will see similar increases.

 

You know the bolded is only technically true. In reality General Electric and other large corporations are paying lots in taxes.

When you say end subsidies for big oil you mean not allow them to deduct costs of doing business. You understand that right? Some of these subsidies (the largest one in fact) includes allowing them to deduct fees related to obtaining federal leases. Why do you think they should not be allowed to deduct these expenses?



Unrelated, but the term tax subsidy is often times a terrible term. Sometimes it is an actual subsidy like with agriculture. Sometimes it is a deduction like with oil. Too many people lump these things together and don't understand the myriad of differences.