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Old 12-02-2012, 04:06 PM   #1
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Fiscal Cliff Thread

I thought this was a big enough deal to warrant having its own thread.

Expiration of Bush Tax Cuts+2011 Budget Control Act Taking Effect(i.e. big across-the-board spending cuts both domestically and on defense)+some other stuff = Fiscal Cliff

The President and Democrats in Congress have made it very clear that they won't agree to any bill that doesn't allow tax rates on the top 1-2% to increase. Even if such a bill were passed in congress, the President would veto. After he extended the Bush tax cuts in 2010, he said he wouldn't do it again, and he won re-election on a platform that made a big point out of keeping his word about that. I believe him.

Congressional Republicans have said they're open to more revenue, but not increasing tax rates, which I guess means they're open to closing loopholes, etc. They soundly rejected the Democrats' opening proposal on Thurdsay, and seem primed to hold the middle class tax cuts hostage.

House Minority Leader Nancy Pelosi threatened to use a procedure called a 'Discharge Petition' to get the bill already passed by the Democratic Senate(which lets the tax cuts expire for all but those making more than $250,000, I believe) on the floor in the House without Speaker Boehner putting it to a vote himself, but it's unclear whether or not she has the votes to succeed.

Some on the left(and those who care deeply about the deficit) - I saw Howard Dean say this on TV this morning - think that perhaps we should go over the cliff, that it might hurt in the short term but be the best thing for the country in the long term because the tax increases and spending cuts would go aways in reducing the deficit and getting us closer to balancing the budget.

Anyway, like I said, I thought it was a big and interesting enough story to warrant its own thread.

Discuss.
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Old 12-02-2012, 04:21 PM   #2
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Is it sad that the reason I know what a discharge petition is, is Legally Blonde 2.
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Old 12-02-2012, 06:47 PM   #3
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With so many Americans trying to pay the bills, put food on the table,
and scrimp and save a few nickles and dimes...

It's a sad commentary that the high and the mighty in Washington
can't seem to do anything but spend our money and tax us more.

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Old 12-02-2012, 08:13 PM   #4
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Agreed. Lets cut public education.
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Old 12-03-2012, 12:31 PM   #5
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Fiscal Cliff was my favourite character on Cheers.
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Old 12-03-2012, 04:21 PM   #6
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The only thing I hope and wish for is that something gets done and they don't just agree to kick the fucking can down the road again. We need some good news for once.
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Old 12-03-2012, 05:34 PM   #7
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I wish people would stop pretending that there is any way that this can be tackled that will be, in the short term, good for the economy. Raising taxes on anybody - the rich, the middle class, the poor - will hurt the economy. Cutting government spending will hurt the economy, even if it goes into seemingly silly things (like, arguably, our [arguably] bloated Defense Department). In the long run, things may work themselves out. But in the short term, no matter what is done, reducing the deficit will be a net economic negative. The US will not only spend less but produce less. Austerity is not good for the economic short term... ever.
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Old 12-03-2012, 05:49 PM   #8
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I agree. We just have to be willing to take the pain right now.
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Old 12-03-2012, 06:51 PM   #9
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I'm still not entirely convinced of that.
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Old 12-03-2012, 08:33 PM   #10
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The only thing I hope and wish for is that something gets done and they don't just agree to kick the fucking can down the road again. We need some good news for once.
Same here. I'll be genuinely stunned if anything of that sort actually happens.

I do feel something notable could or will happen during these talks, because the Republicans need to rebuild their image a bit, so even if it's just for posterity's sake, they might give in on some part of the deal, and the Democrats need to try and look tougher. But whether or not what Congress comes up with will actually make people happy, however, that's debateable. Even if, as noted, it's something that needs to be done, the outcome likely will still piss people off somewhere.
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Old 12-04-2012, 12:15 AM   #11
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I'm still not entirely convinced of that.
And I am sure you could argue that side of it quite well. I am just a pedestrian armchair economist, at best. But I do deal well with numbers and fact. So I am always easily swayed on economics.

That said, the only thing that was ever going to allow them to do this kind of deal (politically) was a ticking clock. Now they have it. I know sheer politics quite well. And I know this is a great time to do it in that sense.

I understand any amount of cuts and tax increases could send us spiraling in this fragile recovery, but on the flipside, we could easily be stuck at or between 1-2% growth for the foreseeable future. Like, many years. And with a continuing deficit and stacking debt it will only get worse. That's my impression anyway, maybe I am missing something.

And again, maybe I am being naive, but I think the biggest problem with the economy right now (aside from the deficit, and in a broad sense) is consumer and corporate confidence.

There was a big tax increase/spending cut deal in 1993.
I don't know how similar the two would be but we ended up okay after that.
Granted the economies of 2013 and 1993 are likely quite different.
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Old 12-04-2012, 01:10 AM   #12
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Same here. I'll be genuinely stunned if anything of that sort actually happens.

I do feel something notable could or will happen during these talks, because the Republicans need to rebuild their image a bit, so even if it's just for posterity's sake, they might give in on some part of the deal, and the Democrats need to try and look tougher. But whether or not what Congress comes up with will actually make people happy, however, that's debateable. Even if, as noted, it's something that needs to be done, the outcome likely will still piss people off somewhere.
I hope people on both sides are pissed off.
That was Clinton's M.O. as well.
Compromise pisses off the base and the fringes.
But it gets stuff done. Progress is good.
And I think Obama likely agrees.

Personally, I think the President maybe should give in on rates (outside of capital gains, which should be doubled) and go for the lowered/capped/eliminated deductions and exemptions. He's got to get revenue and it will be a strong signal and concession to the Reps.
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Old 12-04-2012, 02:05 AM   #13
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pedestrian armchair economist
Can't tell if you're walking or sitting down?
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Old 12-04-2012, 02:10 AM   #14
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one thing for certain, before it is all over this man will cry




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Old 12-04-2012, 07:12 AM   #15
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Personally, I think the President maybe should give in on rates (outside of capital gains, which should be doubled) and go for the lowered/capped/eliminated deductions and exemptions. He's got to get revenue and it will be a strong signal and concession to the Reps.
Paul Krugman and others have written extensively on why this would benefit the wealthy.

I don't understand why Obama should pass on concessions to the Republicans when their ideas are bad and when (I believe) he genuinely thinks that they would hurt the economy and the somewhat stalled recovery. Just for the sake of conceding?

Just because both sides are pissed off doesn't mean the deal is good. It could very well mean that it's a bad idea all around.
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Old 12-04-2012, 08:18 AM   #16
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Unless the system of tax deductions in place makes no sense and is unfair in the way people can benefit from them, then get rid of them.
Mostly because it will help to make the tax system simpler and more transparant.

If the deduction in place are there for good reasons, then increase the tax rates.
This way at least the effects on disposable income can be more accurately determined.

If possible, do a bit of both.
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Old 12-04-2012, 09:02 AM   #17
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If possible, do a bit of both.
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Old 12-04-2012, 09:04 AM   #18
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With respect to deductions, I have long felt that the mortgage interest deduction no longer makes sense in the US. There is a very high rate of home ownership compared to most western democracies, so you could argue that the goal has been achieved.
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Old 12-04-2012, 06:06 PM   #19
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As someone who is on the hunt to own, I'd really like that tax deduction.
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Old 12-04-2012, 06:22 PM   #20
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Sure, as would anyone. But it doesn't make for sound economic policy.

It needs to be phased out because it encourages people to take on debt and it discourages them from aggressively paying down debt. It makes little sense to pay down your mortgage when your interest rate is deductible because you are better off investing that money in something like a dividend-yielding or bank stock.

Why should that be subsidized given that mortgage rates are already lower than other interest rates because a mortgage is an asset-backed security? Right now would the the perfect time to start phasing this deduction out because interest rates are so low that you won't feel the shock as much.

Economic efficiency = lowering the rate and simplifying the tax code by eliminating loopholes and deductions. The Republicans are actually right about this it's just that they have no ideas and no sensical proposals to do so.
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