published Tuesday, November 20th, 2012

Avoiding the 'fiscal cliff'

Though the direction of the nation's economy hangs on a way to avoid the so-called "fiscal cliff" in January, there is yet no clear path out of the woods in Washington. That's again fueling uncertainty, and it's showing up in the stock markets.

President Obama has rightly, and forcefully, reasserted his position that the Bush-era tax cuts should be extended only for the middle class, but not for the wealthiest 2 percent of Americans, and that spending cuts must be balanced with tax reform, closure of tax loopholes and some new revenue in order to fairly achieve deficit reduction. Congressional Republicans, of course, have fallen back on the routine GOP formula: that lower taxes "for all" -- meaning, specifically, retention of the giveaway Bush tax breaks for the super-rich, and even lower rates for them -- are integral to a deal to avoid a crash over the fiscal cliff.

The latter is not likely, however, and investors apparently sense that the pre-election stand-off on fiscal policy may continue, bringing on a slow-down in the economy, and possibly another downgrade in the nation's credit rating. Monday's market uptick notwithstanding, their expectations are evident in a rising sell-off of stocks and equities in order to capture the profits from the current low rate on dividends offered by brand name corporations, investor-owned utilities and telecommunications companies.

It's possible, to be sure, that the shift is partly due to investors' belief that a bipartisan compromise on new taxes and spending cuts would, indeed, restore the Clinton tax rates on the highest incomes. Such a deal might include a rise from 35 to 39.6 percent in the high-end marginal income-tax rate, and a similar rise in the tax rates on dividends and carried interest, which the Bush cuts dropped to a low 15 percent.

Regardless, achievement of a bipartisan deal on cutting the deficit offers the best outcome for the nation. It could provide closure of the most egregious tax loopholes along with measured spending cuts over the next decade. Return of the Clinton-era tax rates on the highest incomes would alone produce $1 trillion in deficit reduction. A fair bipartisan deal also would prompt alternative investments less dependent on annual dividends and more attuned to the nation's longer term needs. And it would promote higher average incomes for the broad class of American workers and bolster their consumer spending, by far the largest driver of the nation's economy.

Beyond that, a bipartisan deal to avoid the fiscal calamity in January of mandatory spending cuts and broad tax increases on the middle class surely would stave off uncertainty about the nation's larger fiscal path. That, in turn, would bolster government investment in infrastructure and essential services, and set an optimistic course for the nation's fiscal health over the long term.

That should be apparent to Americans of every political stripe. In fact, it is. According to the exit polls in the presidential election, a huge majority of voters agreed that keeping the Bush era tax cuts intact for the middle class, but not for the super-wealthy, was vital for the economy. It's the Republican leadership in Washington that is the obstacle to such an agreement.

Other than their connection to their most faithful, fat-cat political donors, their opposition makes no sense. The nation is posed for steadily growing economic recovery. Thwarting that progress by holding out for extension of deep tax cuts that have disproportionately favored the super-wealthy since 2003 would be a huge mistake for the Republican party, as well as for the nation. Americans deserve better.

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conservative said...

"A fair bipartisan deal also would prompt alternative investments less dependent on annual dividends and more attuned to the nation's longer term needs. And it would promote higher average incomes for the broad class of American workers and bolster their consumer spending, by far the largest driver of the nation's economy."

Gibberish, pure liberal gibberish!

This is what liberals write for their sheep. This is gibberish filler surrounded by calls for higher taxes with no calls for reduction in spending which has gotten us in this debt mess.

I challenge any of the usual flaming Socialist Liberals who comment here to interpret this bit of gibberish.

Go ahead, make my day!

November 20, 2012 at 8:45 a.m.
conservative said...

"Beyond that, a bipartisan deal to avoid the fiscal calamity in January of mandatory spending cuts and broad tax increases on the middle class surely would stave off uncertainty about the nation's larger fiscal path."

"Broad tax increases on the middle class" such as a resumption of the payroll tax which funds their future Socialism Security. You know, that sacrosanct "trust fund" which the Demoncrats have said "hands off" for decades but now don't mind defunding.

So, this is nothing more than a tacit admission that the Socialism Security "Trust Fund" was always a lie!

November 20, 2012 at 11:36 a.m.
JustOneWoman said...

With the 24-hour news cycle, it is easy to forget that this was a deal the Republicons agreed to.

".......In fact, it virtually guarantees a revenue increase by the end of 2012. And Boehner knows it.

Here’s how it works: Part of the deficit reduction estimates used to sell this deal to the Republicans count on Congressional Budget Office estimates. Those estimates set a baseline. All reductions have to come from that baseline and if any additional spending is to be made, offsetting cuts must also be enacted.

Here’s where it gets interesting. The CBO baseline already assumes that the Bush Era tax cuts will expire at the end of 2012. The spending levels for 2013 include the additional revenue from those cuts expiring. If Republicans want to extend those tax cuts (which are considered spending), they will have to make cuts to the budget to offset every penny. They won’t have the political control needed to do that before the end of 2012, even if the President loses his office and they take control of the Senate, as the cuts expire in 2012, and a new administration and Congress would not be seated until January 2013.

So, unless Republicans want to try to pass an extension along with offsetting cuts during an election year, those cuts will expire. Senate Majority Leader Harry Reid has already said he will not allow the issue to come to a vote, and the President has vowed he will veto it. So if Republicans want to extend those cuts, they will have to come up with $4T in spending cuts to offset the tax cuts. To make it more difficult still, the deal makes it clear that those cuts must come in a 50/50 ratio between defense and non-defense spending, with Social Security, Medicaid, unemployment insurance, civilian and military retirement off the table. Medicare cuts would only come from the provider side, not the individual."

http://www.editedforclarity.com/2011/08/01/debt-ceiling-deal-the-devil-is-in-the-details/#disqus_thread

You can call this rope-a-dope or 18-dimentional chess. Either way, the deal was made and now the Republicons do not wish to honor it. Surprise surprise!

November 20, 2012 at 11:48 a.m.
conservative said...

"Beyond that, a bipartisan deal to avoid the fiscal calamity in January of mandatory spending cuts and broad tax increases on the middle class surely would stave off uncertainty about the nation's larger fiscal path. That, in turn, would bolster government investment in infrastructure and essential services, and set an optimistic course for the nation's fiscal health over the long term."

So, according to this Liberal/Socialist writer, after a bipartisan deal is reached, we can get back to "government investment in infrastructure and essential services."

Why can't Liberals/Socialists be honest and write "government spending?" What this Liberal/Socialist writer wants is a new round of spending which will only, just like now, increase the national debt.

November 20, 2012 at 12:36 p.m.
Rickaroo said...

It's impossible to just stop spending. If we cut spending as drastically as all of you rabid righties think we should, this nation would come to a screeching halt. It would be a calamity of unbelievable proportions. Spending WILL and MUST go on.

There is nothing wrong with spending; it's not a dirty word. Anyone knows that in order to make money you have to spend money. It's HOW we spend that's important. If we spend on infrastructure, education, and jobs training (and yes, the government CAN create jobs, at least temporarily, to help get the economy back on a sound footing), then the money spent will pay for itself in the long run. It will indeed help to stimulate the economy.

You conservatives hate the very word "spend" so much that you can't think straight. Yet you have no problem with our grossly out of proportion, obscenely huge military spending and needless and wasteful subsidies (spending) for big oil and other corporations that long ago ceased needing those subsidies. Just like you say you want little or no government but in actuality you just want a government that suits your particular needs, you also don't really want to do away with spending either - you just want the government to spend in the ways that you deem acceptable to your own myopic far-right view of things.

November 20, 2012 at 1:09 p.m.
JustOneWoman said...

Spot on! Rickaroo, I certainly do agree. I hear so many speak the talking points of no spending. It is like saying, well hun, since we are carrying a note on the house and car, we can't buy groceries. Anyone with a bank loan does deficit spending. The trouble is they don't understand it. Or they are too short sighted to see the big picture.

November 20, 2012 at 1:39 p.m.
conservative said...

"spending cuts must be balanced with tax reform, closure of tax loopholes and some new revenue"

What he really means is "spending cuts must be balanced with tax reform (tax increases), closure of tax loopholes (tax increases) and some new revenue (tax increases)." Why can't Liberals just be honest?

November 20, 2012 at 5:37 p.m.
conservative said...

"spending cuts must be balanced with tax reform, closure of tax loopholes and some new revenue in order to fairly achieve deficit reduction."

"Closure of tax loopholes" also called "subsidies," "tax breaks," and "tax expenditures" by many, especially Liberals.

These are loaded words used to instill envy, resentment, greed, hatred etc. in the frail of mind, especially those who don't pay federal income taxes.

November 20, 2012 at 6:46 p.m.
conservative said...

"spending cuts must be balanced with tax reform, closure of tax loopholes and some new revenue in order to fairly achieve deficit reduction."

Hmm, how do we get "deficit reduction" if spending cuts are "balanced" by tax increases.

The answer, we don't!

You don't really believe this Liberal/Socialist writer is really willing to cut spending in equal amounts to tax increases, or do you?

November 20, 2012 at 8:41 p.m.
conservative said...

"closure of tax loopholes"

I contend that "loophole" is a inaccurate/misused word in regards to taxes.

Some definitions :

something that has been left out of a law or legal document that people can use to avoid obeying it Macmillan

A way of escaping a difficulty, especially an omission or ambiguity in the wording of a contract or law that provides a means of evading compliance. American Heritage.

The IRS tax laws are specific, not vague about what can and cannot be deducted or written off one's tax liability! Therefore, these are not loopholes.

November 21, 2012 at 8:49 a.m.
conservative said...

"closure of the most egregious tax loopholes"

Well now, according to a November 15th article by Christopher A. Hopkins titled "Personal Finance: Devil in details in ending tax loopholes, deductions" the single largest "tax loophole" is "the exemption of employer-paid health care benefits from income taxation, costing the Treasury $164 billion next year."

So, the poor and middle class worker who gets healthcare through his employer has a "tax loophole!" Now, if the Liberal/Socialists can just trick their sheep into eliminating this "loophole" this tax deduction will be eliminated and the amount of that deduction will be treated as taxable income!

November 21, 2012 at 10:55 a.m.
conservative said...

"closure of the most egregious tax loopholes"

According to the article "Personal Finance: Devil in details in ending tax loopholes, deductions" the number two largest "tax loophole" is the "tax deferral of pension and retirement plan contributions, adding another $163 billion to next year's deficit."

Do you think this "egregious tax loophole" goes only to the rich? Of course not.

So, if you are middle class, be fooled by the Liberal/Socialists and agree to pay higher income taxes when this tax deduction is eliminated.

November 21, 2012 at 1:06 p.m.
joneses said...

CALIFORNIA: The Governor of California is jogging with his dog along a nature trail. A coyote jumps out and attacks the Governor's dog, then bites the Governor.

  1. The Governor starts to intervene, but reflects upon the movie "Bambi" and then realizes he should stop because the coyote is only doing what is natural.

  2. He calls animal control . Animal Control captures the coyote and bills the State $200 testing it for diseases and $500 for relocating it.

  3. He calls a veterinarian. The vet collects the dead dog and bills the State $200 testing it for diseases.

  4. The Governor goes to hospital and spends $3,500 getting checked for diseases from the coyote and on getting his bite wound bandaged.

  5. The running trail gets shut down for 6 months while Fish & Game conducts a $100,000 survey to make sure the area is now free of dangerous animals.

  6. The Governor spends $50,000 in state funds implementing a "coyote awareness program" for residents of the area.

  7. The State Legislature spends $2 million to study how to better treat rabies and how to permanently eradicate the disease throughout the world.

  8. The Governor's security agent is fired for not stopping the attack. The State spends $150,000 to hire and train a new agent with additional special training re: the nature of coyotes.

  9. PETA protests the coyote's relocation and files a $5 million suit against the State.

TENNESSEE The Governor of TENNESSEE is jogging with his dog along a nature trail. A coyote jumps out and attacks his dog.

  1. The Governor shoots the coyote with his State-issued pistol and keeps jogging with the dog he saved. The Governor has spent $0.50 on a .45 ACP hollow point cartridge.

  2. The Buzzards eat the dead coyote. And that, my friends, is why California is broke and TENNESSEE is NOT!!!

November 21, 2012 at 2:07 p.m.
mountainlaurel said...

Conservative says: "These are loaded words used to instill envy, resentment, greed, hatred etc. in the frail of mind, especially those who don't pay federal income taxes."

Lots of people don't pay federal income taxes. . . thanks to the Bush tax cuts:

The chart below from the Tax Policy Center shows the distribution of federal income taxes paid by income level in 2011. It contains a number of interesting factoids, including the following:

7,000 people made more than $1 million but paid no income tax.

22,000 people made between $500,000 and $1 million but paid no income tax.

81,000 people made between $200,000 and $500,000 but paid no income tax.

381,000 people made between $100,000 and $200,000 but paid no income tax.

So that's 491,000 Americans who made more than $100,000 a year who paid no income tax. (Clearly dependent victims who refuse to take responsibility for their lives!)

Read more: http://www.businessinsider.com/7000-millionaires-paid-no-income-tax-2012-9#ixzz2CuJQ8Row

November 21, 2012 at 7:43 p.m.
fairmon said...

Why is no one suggesting the temporary tax rates be allowed to be temporary expire and return to the rates from which "temporarily" put in place. The Clinton era is touted as great so retuning to those rates should work just fine. It is not a cliff to the economy just to those who would pay the different rates. It is the uncertainty that causes stock markets to react. Knowing they will expire would result in a year end sell off to take advantage of the current rates but after year end reinvesting would take the stock market up.

Personal tax rates have little impact. Business rates that have so many tax complications and uncertainties have a tremendous impact on businesses and the decisions made. Congress has shown favor and chosen winners and losers using the tax codes to the point no one understands the system that results in business taxes at about one half of the published 35% rate. Abolish all the business loop holes, grants, subsidies etc. and set the rate at 17% with no exceptions. The savings in accounting departments in large businesses and accountants for smaller business would be a wind fall.

November 22, 2012 at 4:09 a.m.
fairmon said...

mountain laurel said...

So that's 491,000 Americans who made more than $100,000 a year who paid no income tax.

Another example of partial information to make a point or support a position on an issue.

Why did they not pay any taxes? What was the source of the income? Did they invest in a business? Did they have losses carried over from prior years? Were they business owners or individuals earning the income? How much would they pay if the administration's proposal passes? How much would they pay if the "temporary" rates expire?

ml said..... It contains a number of interesting factoids.

You did label it correctly since a factoid means something fictitious or unsubstantiated that is presented as fact, devised especially to gain publicity and accepted because of constant repetition.

A technique often used by journalist and politicians to gain favor who are then parroted by those who agree without realizing the information may lack some facts and be misleading.

November 22, 2012 at 4:32 a.m.
mountainlaurel said...

Good grief, Harp3339. I believe you’re being a bit overly sensitive here. Don't you?

The point of the post was simply to remind “Conservative” that there are a lot of people who don’t pay Federal Income taxes. Surely, you’re not trying to deny the fact that our millionaires and high earners ultimately benefited the most from the Bush tax cuts. Indeed, as I recall the Bush tax cuts brought down the marginal rate for the highest earners from 39.6 percent to 35 percent. The maximum tax rate for income from long-term capital gains rate was brought down to 15 percent from 20 percent, and the tax rate on dividends dropped to 15 percent.

Anyway, Happy Thanksgiving, Harp3339. I hope you have an enjoyable day.

November 22, 2012 at 6:27 a.m.
conservative said...

"Regardless, achievement of a bipartisan deal on cutting the deficit offers the best outcome for the nation. It could provide closure of the most egregious tax loopholes along with measured spending cuts over the next decade."

"closure of the most egregious tax loopholes"

The third largest "egregious tax loopholes" is the tax deduction allowed for your home mortgage interest, this according to the November 15th article in the TFP titled "Personal finance: devil in details ending tax loopholes, deductions."

Now, there are far more of the middle class than there are of the rich. Therefore taking away this long established deduction which is called a "tax loophole" by Liberals/Socialists will in fact be a large tax increase on the middle class more so than the rich.

November 22, 2012 at 9:36 a.m.
conservative said...

Next in line of large "tax loopholes" according to the November 15th article in the TFP titled "Personal finance: devil in details ending tax loopholes, deductions" and "egregious tax loopholes" by this writer would be the "exclusion" of Medicare benefits from income taxes. This amount is $76 billion.

Do you think the middle class will jump for joy when they have to pay taxes on Medicare benefits?

Do you think the middle class even view Medicare benefits as a "tax loophole" or an "egregious tax loophole?"

November 22, 2012 at 10:48 a.m.
conservative said...

Another large "tax loophole" or an "egregious tax loophole" considered by Liberals/Socialists is the lower capital gains tax coming in at $71 billion.

Yes, that is a lower rate for those who buy and sell stock and this may favor the rich. However, this "tax deduction" or "tax loophole" also applies to to the gains realized when anyone, mostly the middle class and poor, sell their home.

Will the poor and middle class be willing to pay the feds taxes when they sell their home in order to stick it to the rich?

November 22, 2012 at 1:12 p.m.
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