THE FISCAL CLIFF

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tLIB
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Re: THE FISCAL CLIFF

Postby tLIB » Thu Nov 08, 2012 12:43 pm

Wabash wrote:The saving grace for the South Bay is that both sides consider defense spending sacred. Ironically some of the strongest conservatives I've ever met worked for defense contractors. They labored under the delusion that they were engaged in free enterprise. The second strongest group of conservatives I've ever met were military personnel.

It would always be fun listening to them bemoan big government. I would shake my head in disbelief given that both groups benefit from the poster child of big government.


I don't think I could agree more. I too have known conservatives working for defense contractors. Ike was right.



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barstow wiz
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Re: THE FISCAL CLIFF

Postby barstow wiz » Thu Nov 08, 2012 7:30 pm

they'll delay it a year.
:)

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tLIB
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Re: THE FISCAL CLIFF

Postby tLIB » Thu Nov 08, 2012 9:35 pm

barstow wiz wrote:they'll delay it a year.


I wouldn't bet on it either way.

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Re: THE FISCAL CLIFF

Postby kramer » Fri Nov 09, 2012 9:25 am

tLIB wrote:OK, listening to the business leaders today:They predict a huge contraction if we fall off the fiscal cliff.



Here's An Insane Chart Showing Just How Much The Fiscal Cliff Is Being Hyped

As Calculated Risk (and many others) note, the term 'Fiscal Cliff' is a misnomer. The US economy is not going to fly off a cliff and implode on January 1 if we don't make a deal. There will be a drag due to higher taxes and lower spending, but much of that can and be wound back early in the year.

But the talk about the fiscal cliff has grown into a deafening roar, and here's proof that it's way out of proportion.

Matthew Fleury of Bank of America takes a look at the volume of articles mentioning The Fiscal Cliff and The Debt Ceiling:

Image

http://www.businessinsider.com/chart-fi ... ng-2012-11


Looks to me like media massaging of the public to weaken our resistance to tax hikes (or Fleury used Michael Mann's hockey stick program to draw the blue line).
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tLIB
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Re: THE FISCAL CLIFF

Postby tLIB » Fri Nov 09, 2012 12:37 pm

It would be interesting to see what would happen if we fall off the cliff Kraemer.

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Re: THE FISCAL CLIFF

Postby Parrotpaul » Fri Nov 09, 2012 12:46 pm

tLIB wrote:It would be interesting to see what would happen if we fall off the cliff Kraemer.

I agree...kind of. I am still fuming at the House Republicans' manufactured debt crisis during the summer of 2011. A whole lot of investor money went straight down the tubes over that ridiculous GOP stand. How will the middle class get set back should we go over the cliff? Does anyone really know that, or is this one more manufactured crisis? if the tax cuts go away, I'm reasonably certain something would then happen tout suite to get many of those cuts back on the books to still be applicable for tax year 2013....but while the boys play with their (fill in the blank) in Washington, what happens to the average American trying to get that 401K back up to snuff....will this cost one more year of waiting whilst they play for our net worths to return to what they were prior to this dumb ass game?
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Re: THE FISCAL CLIFF

Postby kramer » Fri Nov 09, 2012 4:24 pm

tLIB wrote:It would be interesting to see what would happen if we fall off the cliff Kraemer.


There is no fiscal cliff tLUB.
“We should have been warned by the CFC/ozone affair because the corruption of science in that was so bad that something like 80% of the measurements being made during that time were either faked, or incompetently done.”

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tLIB
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Re: THE FISCAL CLIFF

Postby tLIB » Fri Nov 09, 2012 11:41 pm

kramer wrote:
There is no fiscal cliff tLUB.


I am not sure what you mean? Are you saying that they will pass a measure to increase the debt limit? If so, I agree, the probably will. But investors are not certain about that.

If the debt limit is not raised, then automatic spending cuts will occur. Also, the Bush tax cuts will expire. This is what they dubbed the "fiscal cliff."

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Re: THE FISCAL CLIFF

Postby John Q. Public » Sat Nov 10, 2012 8:21 am

Parrotpaul wrote:I am still fuming at the House Republicans' manufactured debt crisis during the summer of 2011. A whole lot of investor money went straight down the tubes over that ridiculous GOP stand.

That's the part that has me especially :steam: ed. This whole thing and the resulting damage to the stock market and MY 401k was all manufactured by a House majority that didn't like the President. It never had to happen. It was a political issue that blew up on Republicans and now it stands to send us back into recession. I'm not happy about that.
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Re: THE FISCAL CLIFF

Postby Troglodyte » Sat Nov 10, 2012 10:00 am

tLIB wrote:It would be interesting to see what would happen if we fall off the cliff Kraemer.

Parrotpaul wrote: How will the middle class get set back should we go over the cliff? Does anyone really know that, or is this one more manufactured crisis?

Congress Sees Rising Urgency on Fiscal Deal
By JONATHAN WEISMAN
Published: NY Times: November 8, 2012 196 Comments
http://www.nytimes.com/2012/11/09/us/po ... -deal.html

The nonpartisan Congressional Budget Office underscored the stakes in a report Thursday that framed Washington’s dilemma. It said that if automatic spending cuts go into force and all the Bush-era tax cuts expire, the nation would slip into recession next year and unemployment would rise to 9.1 percent, from October’s rate of 7.9 percent. But simply canceling those deficit-reduction measures would risk a financial crisis that would make matters worse, the report said.
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Parrotpaul
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Re: THE FISCAL CLIFF

Postby Parrotpaul » Sat Nov 10, 2012 12:13 pm

I found this article. It focuses much more specifically on how the middle class will be impacted by the "fiscal cliff" crisis.

The AMT set to squeeze the middle class.
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Re: THE FISCAL CLIFF

Postby kramer » Sat Nov 10, 2012 1:31 pm

Parrotpaul wrote:I am still fuming at the House Republicans' manufactured debt crisis during the summer of 2011. A whole lot of investor money went straight down the tubes over that ridiculous GOP stand.


John Q. Public wrote:That's the part that has me especially :steam: ed. This whole thing and the resulting damage to the stock market and MY 401k was all manufactured by a House majority that didn't like the President.


When did the damage to the stock market happen?
“We should have been warned by the CFC/ozone affair because the corruption of science in that was so bad that something like 80% of the measurements being made during that time were either faked, or incompetently done.”

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Re: THE FISCAL CLIFF

Postby Parrotpaul » Sat Nov 10, 2012 1:33 pm

Started in around end of July 2011 and it never recovered that level until about nine months later. Are your charts failing you?
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Re: THE FISCAL CLIFF

Postby John Q. Public » Sat Nov 10, 2012 1:42 pm

kramer wrote:When did the damage to the stock market happen?

Right now and the month or so after Republicans inserted the debt "crisis" into a simple vote to pay our bills.
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Re: THE FISCAL CLIFF

Postby Parrotpaul » Sat Nov 10, 2012 2:29 pm

From Barron's...sorry about the length...it's a pretty good analysis, and it is a subscription service...I don't know if you will be able to read it all......let me know.

Shock Treatment


Shock Treatment

By GENE EPSTEIN

The so-called fiscal cliff has all to do with tax increases and almost nothing to do with spending cuts. Can the economy survive?

When Ben Bernanke gets concerned, the rest of us should start worrying. "If the fiscal cliff isn't addressed," warned the Federal Reserve chairman in a Sept. 13 appearance before the Senate Finance Committee, "I don't think our tools are strong enough to offset the effects." After thus disavowing central-bank responsibility if the U.S. economy falls off the fiscal cliff, Bernanke plaintively added, "So I think it's really important for the fiscal policy makers to, you know, work together and find a solution."

Nearly two months later -- and just days after the presidential election -- policy makers have yet to find a solution, mainly for lack of trying. On Friday, Republican House Speaker John Boehner and newly re-elected President Barack Obama declared their intention to try to work together to avert the fiscal cliff. If they fail, the Congressional Budget Office has warned of a "contraction in output in the first half of 2013 [that] would probably be judged to be a recession." From real growth in gross domestic product in the second half of this year that is likely running at an annual rate of 2%, the CBO projects a contraction in the first half at an annual rate of 1%.

More optimistically, Barron's puts the odds of an outright contraction at even money, a risk no responsible policy maker should want to take. More likely than recession would be a return of that ugly economist's neologism, a "growth recession," in which economic growth continues, but at such a subdued pace that the unemployment rate rises. That's because the nation's jobs growth wouldn't be enough to offset the growth in the labor force.

The fiscal cliff is far less about spending cuts than it is about tax increases. As commonly defined, the fiscal cliff refers to an unusual combination of federal tax hikes coinciding with reductions in federal spending, all of them coming on Jan. 1, 2013. Indeed, a Wall Street Journal front-page story last week spoke, for example, of "deep, automatic federal-spending cuts and tax increases."

Wrong. While the tax increases will certainly be steep, the "deep" spending cuts are much shallower. More important, the spending cuts will be more than offset by inexorable increases in the cost of entitlement programs. The net result will be no reduction in federal spending. The cuts popularly cited mainly consist of automatic reductions under the 2011 Budget Control Act that require equal dollar cuts in defense and nondefense programs starting in fiscal 2013, through an action known as sequestration. Painful as those cuts may be, however, they are not enough to cause the government's overall spending to decline. Projections by the nonpartisan Congressional Budget Office and the White House's Office of Management and Budget both show that overall dollar spending won't decrease in calendar year 2013. What all the projections do show is a much slower rate of increase.

That's partly because the huge influx of aging baby boomers will be laying just claim to their Social Security benefits right on schedule. So we are again dealing with the budgetary newspeak of decreases in spending that are really just a reduction in the increase.

Even that smaller-than-usual increase might be somewhat understated. Both CBO and OMB might have erred on the side of optimism about one wild card in federal spending, the cost of servicing the burgeoning federal debt. Since the federal budget will still be running a deficit, the outstanding debt will grow. But OMB and CBO both project only a modest increase in servicing cost based on the assumption that interest costs will stay at their historical lows. If not, total federal spending will increase by even more.

Those sensitive to the nuances of fiscal policy might still argue that even a slowdown in the rate of increase in spending still has dampening effects on the economy. But that sin of omission should still have much less of an impact than the far larger sin of commission on the tax side.

The CBO projects nearly a half-trillion-dollar jump in tax revenue in calendar 2013 that has no offsets. According to CBO estimates, that will mean a 2.7% increase in tax as a share of GDP. To put that figure in perspective, there has not been a single year since 1970 when an increase in federal tax revenue ran even as high as 1%, with just three years of +0.9%. The last year comparable to this was one was 1969, when the rise in tax revenue as a share of nominal GDP ran 2.1%. By fourth quarter 1969, the economy had slipped into recession.

FOR STARTERS, IT'S CLEAR THAT, if spending and investing power proportionate to 2.7% of GDP is drained from consumers and business over the course of a year through higher taxes, there is likely to be a slowdown in economic activity. Whether the result will be outright recession depends on something more difficult to gauge -- the extent to which the tax hikes really do shock, taking consumers and business by surprise. When consumers and business are relatively unprepared, the slowdown in economic activity is likely to be greater.

As for any shock and surprise on the spending side, half the spending cuts mandated by the 2011 Budget Control Act will fall on defense, and were probably anticipated. It's unclear how much shock will be caused by the tax increases.

The looming fiscal cliff has gotten so much play in the media that it already has probably placed a damper on economic activity. And to the degree that it has, one saving grace is that consumers and business will be better prepared for the cliff's effects.

As Stanford University economist John Taylor recently pointed out on his blog, "The fiscal cliff was not created by aliens from outer space. It is another poor government policy created in Washington." When we look on the tax side (see above), we see an odd assortment of inadvertent reversals of tax cuts all converging at the same time.

In his address Friday, President Obama made it clear that he wants to retain the tax cuts on the first $200,000 of taxable income for individuals and $250,000 for couples. It turns out that most of the pending increases in terms of sheer dollars will fall on these "non-rich." So the president should have a natural desire to strike a deal.

The largest impact ($161 billion) consists of the still-pending rollback of the tax cuts passed under former President George W. Bush. According to Obama's own Office of Management and Budget, nearly 60%, or $95 billion, of what would be raised by rolling back the tax cuts would come from taxpayers who fall below the income thresholds of $250,000 for couples and $200,000 for single people. Both sides of the aisle will probably favor postponement for this group, especially because $95 billion will do a lot to blunt the tax shock.
The president made it clear Friday that he plans to restore these taxes on the richest 2%, which will raise the remaining $66 billion. A substantial portion of that ($28 billion) is expected to fall on their dividends and capital gains. Boehner, however, made it equally clear that he's against "raising taxes on the wealthiest Americans."

Regarding the $66 billion that OMB estimates could be realized though higher taxes on the top 2%, the estimated $28 billion from dividends and capital gains could be too high. Steeper tax rates can alter behavior, especially investment behavior. The full realization of that $28 billion depends on the size of the dividends received and capital gains realized.

Investors now face a neutral trade-off between dividends and long-term capital gains, since both are taxed at 15%. With the rollback of the tax cuts, the level playing field will be tilted once again, with capital gains taxed at 20% and dividends taxed as ordinary income, with rates as high as 39.6%. That sort of differential will mean a return of the perverse desire by investors to have companies reinvest earnings rather than distribute them as dividends, in the hope that the reinvested earnings will turn into more lightly taxed capital gains. The result will be what economists have referred to as a "lock-in" effect, with harm to economic efficiency.

Another tax that falls mainly on the non-rich is the alternative minimum tax ($114 billion). Each year, a taxpayer is supposed to pay the AMT or a regular tax, whichever is greater. But since the AMT was hurting middle-income taxpayers, an exemption roughly indexed to inflation, called a "patch," has been protecting them against its effects. The last exemption expired in December 2011, however, which means income earned in 2012 could feel the influence of the AMT. Since the bad news will be learned by taxpayers when they file their returns, the CBO projects that the huge sums will be paid almost entirely in 2013.

It seems likely, however, that the patch on the AMT will have a good chance of getting extended. Less likely -- so far, at least -- will be the continuance of the cut in the payroll tax on employees by two percentage points (worth $120 billion), instituted in January 2011. That payroll-tax holiday, which is technically hurting the solvency of Social Security, doesn't seem popular with the White House.

BUT IF POLICY MAKERS do take Fed Chairman Bernanke's warning seriously, everything should be on the table. That would mean rescinding many of the tax hikes, while less happily reversing the spending cuts, thus allowing federal spending to increase faster than planned. No matter which way it gets done, the result would be a widening of the fiscal deficit.

That might set off alarms. For those deficit hawks concerned about red ink virtually without end, why not sit back and celebrate the fiscal contraction otherwise known as the fiscal cliff?

The standard drug-addict analogy helps answer that question. Much as we might have opposed shooting up the economic patient with such huge doses of fiscal-deficit heroin to begin with -- much as we might welcome the ultimate return to balanced-budget sobriety -- we might still fear the consequences of withdrawal if the dose gets cut so drastically in so short a time.

The economy's deficit habit must be abandoned, or the build-up in debt will cause a major crash. But the fiscal cliff, or tax shock, poses a great risk to economic growth in 2013. Our leaders must therefore kick the deficit-reduction can down the road yet one more time. We might take comfort in knowing that they have a talent for that sort of activity.

<SNIP>
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Re: THE FISCAL CLIFF

Postby Troglodyte » Sat Nov 10, 2012 2:32 pm

Even hard core socialists can tell when enough tax is too much..

Denmark to scrap world's first fat tax
Published: Bangkok Post: 10/11/2012 at 11:17 PM Online news:
http://www.bangkokpost.com/breakingnews ... st-fat-tax

Denmark said Saturday it would scrap a fat tax it introduced a little over a year ago in a world first, saying the measure was costly and failed to change Danes' eating habits.

"The fat tax and the extension of the chocolate tax - the so-called sugar tax - has been criticised for increasing prices for consumers, increasing companies' administrative costs and putting Danish jobs at risk,'' the Danish tax ministry said in a statement.

"At the same time it is believed that the fat tax has, to a lesser extent, contributed to Danes travelling across the border to make purchases,'' it added.

"Against this background, the government and the (far-left) Red Green Party have agreed to abolish the fat tax and cancel the planned sugar tax,'' the ministry said.

Denmark's centre-left minority government is made up of the Social Democrats, Social Liberals and Socialist People's Party, and requires support from other parties to pass legislation in parliament.
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Parrotpaul
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Re: THE FISCAL CLIFF

Postby Parrotpaul » Sat Nov 10, 2012 2:41 pm

What does that have to do with the topic?
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Re: THE FISCAL CLIFF

Postby Troglodyte » Sat Nov 10, 2012 2:58 pm

Parrotpaul wrote:What does that have to do with the topic?

It shows that even to law abiding hard core socialists adding new taxes is more expensive and destructive than the problems they are trying to solve.
The current aqdministration's only solution to the "fiscal Cliff" is to raise taxes and increase the debt ceiling. The deemocrats not only refuse to talk with the GOP about cutting costly and unproductive "social" programs, but they threaten to drive us over the "cliff" if their demands are not met on tax increases. The tax increase on the so called "rich" will not gain the revenue to begin to pay down the debt, but will end up forcing people to get more creative in avoiding taxes bringing a net decrease in revenue and jobs..
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Re: THE FISCAL CLIFF

Postby Troglodyte » Sat Nov 10, 2012 3:04 pm

Debt ceiling crisis looms at year end
Published: Nov. 9, 2012 at 12:25 PM
By GILLIAN WHITE, MEDILL NEWS SERVICE, Written for UPI

WASHINGTON, Nov. 9 (UPI) -- While the United States has been preoccupied with electing a new president and finding ways to reduce the deficit, an issue that experts see as a more critical event has started inching closer as the country once again nears its debt limit.

The United States is on course to hit its debt ceiling, which stands at $16.4 trillion, at the close of 2012, an Oct. 31 statement from the U.S. Treasury Department said.

This will occur around the same time Congress begins deliberating on issues of national deficit reduction. The country will likely once again resort to "extraordinary measures" in order to continue meeting debt obligations through early 2013.

Experts say even if the Treasury takes the necessary steps to prevent a breach of the debt limit, it will be a very short-term solution.

"There's less money available for extreme measures than there was last year. It will buy us less time," said Steve Bell, director of the Economic Policy Project at the Bipartisan Policy Center.

The possibility of defaulting on U.S. obligations is a much more dire scenario than going over the fiscal cliff, said Patrick Lester director of federal fiscal policy at OMB Watch, a government watchdog group in Washington.

"Sequestration is nothing like the debt ceiling," said Lester. "If we had gone past the ceiling, you are really messing with the faith and credit of the U.S. Markets have every reason to freak out if we don't pay our bills."

Read more: http://www.upi.com/Top_News/Special/201 ... z2BrbUCiAd
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tLIB
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Re: THE FISCAL CLIFF

Postby tLIB » Sat Nov 10, 2012 5:46 pm

I think you are right Trog. Markets would freak out if the U.S. government defaults even ONE DAY on its debt.

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