"Fiscal Cliff"

[RandBlade]

Sorry if this is getting discussed in another thread, couldn't see any thread clearly labelled about this and don't have time to read them all.

Looks increasingly likely that America will "fall off the cliff" tomorrow. I'd be tempted to say good - cutting the deficit is important and I believe the risks are majorly overrated - but I don't expect it to be permanent, which is a shame. My current expectation is that the Democrats will permit the tax rises etc to automatically take effect then on 4 January to immediately reverse the ones they don't like (by this stage a tax cut, not a rise) and extend unemployment benefits etc (which is a terrible idea, those expiring is one of the best parts of the cliff) and dare the Republicans to oppose the tax cuts. Minimal tax rises and spending cuts will be left - and just those it seems wanted by the Democrats.

I don't see any fix actually happening for the deficit, the cliff ought to be a starting point, the least that will happen.

Also can I just say I really dislike this notion of reporting figures as over 10 years. Eg $1.2 Trillion dollars of tax over 10 years keeps getting bandied about as a figure. Nobody knows what will happen in 10 years time, its ridiculous. On new years 2003 did you picture all that has happened over the last decade. Its also not a very impressive sum of money, $120bn per annum on a > $1trillion deficit. Comparing that to the UK with 1/6th of the population that's $20bn per annum or £12.37bn per annum. Given the scale of the challenges, I don't think that's a lot at all.

[Dreadnaught]

The ten-year thing is indeed a silly ploy made to make proposed cuts (or new government initiatives) look larger than they are. And referencing things in a ten-year window also obscures the deficit that needs to be solved ($1,000 billion/year) with the amount they are talking about cutting ($100 billion/year, IE 10% as much as is needed).

[RandBlade]

Especially if (and I don't know if its true or not but probably is) the cuts are tail-ended with a higher figure later.

$1.2bn could be made up not of $120bn per year but an estimated say $90bn this year and $150bn in year 10 (after certain probably optimistic assumptions of a decade of uninterrupted growth etc). So not even 10%

[Wraith]

http://firstread.nbcnews.com/_news/2...-complete?lite

[RandBlade]

Surprise, surprise it looks like the tax rises won't happen and wasting a fortune on unaffordable expenditure like extended unemployment benefits will continue without anything commensurate to take its place

So once more after huffing and puffing for months jack squat is being done to solve the problem. Instead expect the can to be kicked once more down the road until the next crisis.

[RandBlade]

House of Reps have gone home so at least technically the deadline will be passed, although it seems a deal may be reached during the New Years Day public holiday.

[Veldan Rath]

Is this kabuki dance really surprising anyone?

[Lewkowski]

What disturbed me at work today was that people were complaining they were going to get a pay cut because the government couldn't get their act together. Sigh. This is why short term reductions in payroll taxes were such a terrible idea.

[RandBlade]

What disturbed me at work today was that people were complaining they were going to get a pay cut because the government couldn't get their act together. Sigh. This is why short term reductions in payroll taxes were such a terrible idea.

What disturbed me at Atari years ago was you cheerleading unfunded, temporary Bush tax cuts (and then spending rises too). I said then and history is showing it once more to be true - a deficit is a tax on the future and a temporary tax cut is not a real one.

So it looks like much of the unfunded spending will be extended for another three months: with nothing to pay for it. It looks like much of the unfunded temporary tax cuts will be continued: with nothing to pay for it. Once more a right royal kicking of the can down the road.

[Lewkowski]

What disturbed me at Atari years ago was you cheerleading unfunded, temporary Bush tax cuts (and then spending rises too). I said then and history is showing it once more to be true - a deficit is a tax on the future and a temporary tax cut is not a real one.

So it looks like much of the unfunded spending will be extended for another three months: with nothing to pay for it. It looks like much of the unfunded temporary tax cuts will be continued: with nothing to pay for it. Once more a right royal kicking of the can down the road.

I wanted the tax cuts to be permanent and spending to be decreased. Temporary is the dumb part.

[RandBlade]

I wanted the tax cuts to be permanent and spending to be decreased. Temporary is the dumb part.

Except Bush neither permanently cut taxes or spending did he?

the Bush tax cuts should be allowed to expire for everyone, spending should be cut to what can be afforded - and then and only then should permanent tax cuts take affect.

[Lewkowski]

Except Bush neither permanently cut taxes or spending did he?

the Bush tax cuts should be allowed to expire for everyone, spending should be cut to what can be afforded - and then and only then should permanent tax cuts take affect.

Which is bad but the answer is not to raise taxes and allow over spending to occur. The unfortunate reality is this - if politicians can get away with not issuing spending cuts they will. Its too easy to be used as political fodder "He cut health care/education/senior care/ect ect." Keeping taxation low permanently will force spending cuts at some point. Hopefully sooner rather then later but that doesn't look like it will happen.

[GGT]

So once more after huffing and puffing for months jack squat is being done to solve the problem. Instead expect the can to be kicked once more down the road until the next crisis.

FYI, "kicking the can down the road" is one of 2012's most loathed maxims.

What disturbed me at work today was that people were complaining they were going to get a pay cut because the government couldn't get their act together. Sigh. This is why short term reductions in payroll taxes were such a terrible idea.

While I agree that suspending payroll tax deductions is a short-term bandaid, it's a "stimulus" that gives workers more money in their pocket....which they'll spend. Businesses appreciate that during recessionary recovery periods. More palatable than paying workers higher wages, reducing executive pay or shareholder profits. *sigh*

[Veldan Rath]

FYI, "kicking the can down the road" is one of 2012's most loathed maxims.

So is "Fair Share"

[GGT]

Also, our "Fiscal Cliff" was a self-manufactured crisis designed by our congressional "leaders", to force the hard decisions. But now that the deadline has arrived, they freaked out about sequestration and its automatic spending cuts.

These "leaders" have been more focused on party politics, gerrymandering congressional districts, or changing voting laws, than actual governance. We have a divided government because the party politicians and power brokers made it so....not because the voters wanted it this way.

It will be a repeat of 2011 when our national debt ceiling and credit rating comes into play, and (R) Tea Party fanatics try to use their votes to stall or filibuster any bill. As if threatening full faith and credit of US Treasurys is a good way to pay our debts, or reducing tax revenues can pay down our deficit.

Starve the beast, eh? Maybe they'll be so successful the USD won't be considered the world's currency much longer. Why should it, with such legislative morons? Central bankers can only do so much with monetary policy, after all.

Happy New Year.

[GGT]

Rule 12 applies

If my state-county-township-municipality decided to go over the "fiscal cliff"....that would mean all my property, sales, and income taxes were on the line. Possibly no emergency protections from police or fire departments, but still expecting basic funding for public schools, teachers, facilities.

Why would these things be mutually exclusive?

[Dreadnaught]

I was prepared for some kind of tax increases to move forward, but this is a shit deal. The media will raise the flag of faux economics and howl at the "obstructionist" Republicans, but I'm beginning to think the House should not pass this.

“There’s not a lot of support for the bill as is. I personally hate it,” said Representative John Campbell, Republican of California. “The speaker, the day after the election, said we would give on taxes, and we have, but we wanted spending cuts. This bill has spending increases. Are you kidding me?”

http://www.nytimes.com/2013/01/02/us...cal-cliff.html

I agree. If we need a bigger and more "real" crisis to negotiate more of a grand bargain, let's do this now rather than later.

[RandBlade]

Allowing the unfunded tax cuts to end until the deficit is plugged will not exclusively close the gap. There'll still be a major amount of cuts required. Plus it's too easy to be able to give away sweeties of tax cuts etc if you can just borrow for them without actually finding the money for it. If tax cuts could only be given if spending was cut sufficiently then suddenly people might think twice as to if that spending was actually necessary.

[Ominous Gamer]

Seems this deal is going to require a slight tweaking on the household budget. Her gym membership vs my video game fund seems to be where the immediate battle lines will be drawn. yipee.

[Veldan Rath]

Who wants to lay odds on Ms. Gamer winning that one?

[Ominous Gamer]

I think I'll keep her out of loop until the Steam sale ends, that catalog along with ~150 days of SWTOR subscription should put me pretty close to when my car is paid off. So I'll bank this as a personal sacrifice for the good of the family.

[Veldan Rath]

Such a saint ye are!

And congrats on the almost paid off car!

[RandBlade]

In these most recent negotiations the Democrats had the whip hand because of the expiration of the Bush tax cuts.

However after this temporary band aid it seems in two months time we're going to be back to square one with no solution to the deficit, the sequestration still scheduled and once more the debt ceiling will be reached. Without the tax rates to barter over I suspect the GOP will attempt to be as inflexible as Obama has been this time. Expect Feb 28 to once more be debating a crisis with no solution reached. Rinse and repeat - anyone disagree?

[Dreadnaught]

I keep going back-and-forth over whether this shitty deal is very shitty or just fairly shitty.

On one hand, it's a tax increase in some key areas that I think should be reduced, notably dividend and estate taxes. I'm less concerned with raising income taxes a bit.

On the other hand, we now have "permanent" rates for things like dividends. And they are lower than income taxes, which is important. So, come a few month's time, the idea of raising taxes will be off the table. Obama and the Democratic-Socialists will try to bring it up again, however they will have just that much less leverage. And the Republicans will have just a bit more gall to stonewall on this when the debt ceiling and sequester cuts come into play in March.

All in all, I think there is still a reasonable chance of some kind of government shutdown in the next few months.

[Enoch the Red]

I keep going back-and-forth over whether this shitty deal is very shitty or just fairly shitty.

On one hand, it's a tax increase in some key areas that I think should be reduced, notably dividend and estate taxes. I'm less concerned with raising income taxes a bit.

On the other hand, we now have "permanent" rates for things like dividends. And they are lower than income taxes, which is important. So, come a few month's time, the idea of raising taxes will be off the table. Obama and the Democratic-Socialists will try to bring it up again, however they will have just that much less leverage. And the Republicans will have just a bit more gall to stonewall on this when the debt ceiling and sequester cuts come into play in March.

All in all, I think there is still a reasonable chance of some kind of government shutdown in the next few months.

Shitty for who?

The "fiscal cliff" legislation passed this week included $76 billion in special-interest tax credits for the likes of General Electric, Hollywood and even Captain Morgan. But these subsidies weren't the fruit of eleventh-hour lobbying conducted on the cliff's edge -- they were crafted back in August in a Senate committee, and they sat dormant until the White House reportedly insisted on them this week.

The Family and Business Tax Cut Certainty Act of 2012, which passed through the Senate Finance Committee in August, was copied and pasted into the fiscal cliff legislation, yielding a victory for biotech companies, wind-turbine-makers, biodiesel producers, film studios -- and their lobbyists. So, if you're wondering how algae subsidies became part of a must-pass package to avert the dreaded fiscal cliff, credit the Biotechnology Industry Organization's lobbying last summer.

Some tax lobbyists mostly ignored the August bill "because they thought it would be just a political document," one K Streeter told me. "They were the ones that got bit in the butt."

Here's what happened: In late July, Finance Chairman Max Baucus announced the committee would soon convene to craft a bill extending many expiring tax credits. This attracted lobbyists like a raw steak attracts wolves.

Former Sens. John Breaux, D-La., and Trent Lott, R-Miss., a pair of rainmaker lobbyists, pleaded for extensions on behalf of a powerful lineup of clients.
General Electric and Citigroup, for instance, hired Breaux and Lott to extend a tax provision that allows multinational corporations to defer U.S. taxes by moving profits into offshore financial subsidiaries. This provision -- known as the "active financing exception" -- is the main tool GE uses to avoid nearly all U.S. corporate income tax.

Liquor giant Diageo also retained Breaux and Lott to win extensions on two provisions benefitting rum-making in Puerto Rico.
The K Street firm Capitol Tax Partners, led by Treasury Department alumni from the Clinton administration, represented an even more impressive list of tax clients, who paid CTP more than $1.68 million in the third quarter.

Besides financial clients like Citi, Goldman Sachs and Morgan Stanley, CTP represented green energy companies like GE and the American Wind Energy Association. These companies won extension and expansion of the production tax credit for wind energy.

Hollywood hired CTP, too: The Motion Picture Association of America won an extension on tax credits for film production.

After packing 50 tax credit extensions into the bill, the committee voted 19 to 5 to pass it. But then it stalled. The Senate left for the conventions and the fall campaign. Meanwhile, House Republicans signaled resistance to some of the extensions -- especially for green energy.

One lobbyist said he didn't worry too much about the Baucus bill because "we knew the House wasn't going to pass it." But another lobbyist, who had worked on the Puerto Rico issues, said he saw Baucus' bill as an important starting point that "set the parameters" of a future fight with House Republicans.

But there never was a fight. Baucus' bill sat ignored until last week, when the White House sat down with Senate Republicans to craft a deal averting the fiscal cliff.

A Republican Senate aide familiar with the cliff negotiations tells me the White House wanted permanent extensions of a whole slew of corporate tax credits. When Senate Republicans said no, "the White House insisted that the exact language" of the Baucus bill be included in the fiscal cliff deal. "They were absolutely insistent," another aide tells me. (The White House did not return requests for comment.)

Sure enough, Title II of the fiscal cliff legislation is nearly a word-for-word replication of the Family and Business Tax Cut Certainty Act of 2012.
So, this wasn't a case of lobbyists sneaking provisions into a huge package at the last minute. That probably wouldn't have been possible, many lobbyists told me Wednesday, because the workload in the past two weeks was too large and the political stakes were too high.

One lobbyist who worked on the bill over the summer said he would never ask a member " 'Hey, can you do this for a client,' when their political lives are on the line."

"The legislators and the staff go underground when things get so intense," another Hill staffer-turned-lobbyist told me. "Nobody has time for a meeting. Nobody wants to talk about what's going on. ... The key is to plant the seed months in advance."

GE, Goldman Sachs, Diageo -- they planted their seeds over the summer. They'll enjoy the fruit in the new year.

Looks like you just aren't looking at it from the right angle, Dread.

[GGT]

....And the Republicans will have just a bit more gall to stonewall on this when the debt ceiling and sequester cuts come into play in March.

All in all, I think there is still a reasonable chance of some kind of government shutdown in the next few months.

If Republicans try to pull a repeat of the 2011 debt ceiling stunt....the "Fiscal Cliff" will pale in comparison.

[Dreadnaught]

If Republicans try to pull a repeat of the 2011 debt ceiling stunt....the "Fiscal Cliff" will pale in comparison.

I encourage them to do this, as they and Obama have almost-explicitly agreed to dance around this to deal with the spending cuts that are now needed.

[GGT]

I encourage them to do this, as they and Obama have almost-explicitly agreed to dance around this to deal with the spending cuts that are now needed.

Why would you want to gamble with the "full faith and credit" of the US, our ability to pay bills already incurred, and risk treasury dollar values....for a political/policy fight? Have you forgotten what happened in 2011?

[RandBlade]

Why would you want to gamble with the "full faith and credit" of the US, our ability to pay bills already incurred, and risk treasury dollar values....for a political/policy fight? Have you forgotten what happened in 2011?

Because NOTHING happened in 2011

[EyeKhan]

The American Taxpayer Relief Act of 2012

The new year began with some political drama, as last-minute negotiations attempted to avert sending the nation over the "fiscal cliff." Technically, we actually did go over the cliff, however briefly, as a host of tax provisions and automatic spending cuts took effect at the stroke of midnight on December 31, 2012. However, January 1, 2013, saw legislation--retroactively effective--pass the U.S. Senate, and then later the House of Representatives. The American Taxpayer Relief Act of 2012 (ATRA) permanently extends a number of major tax provisions and temporarily extends many others. Here are the basics.

Tax Rates
For most individuals, the legislation permanently extends the lower federal income tax rates that have existed for the last decade. That means most taxpayers will continue to pay tax according to the same six tax brackets (10%, 15%, 25%, 28%, 33%, and 35%) that applied for 2012. The top federal income tax rate, however, will increase to 39.6% beginning in 2013 for individuals with income that exceeds $400,000 ($450,000 for married couples filing joint returns).

Generally, lower tax rates that applied to long-term capital gain and qualifying dividends have been permanently extended for most individuals as well. If you're in the 10% or 15% marginal income tax bracket, a special 0% rate generally applies. If you are in the 25%, 28%, 33%, or 35% tax brackets, a 15% maximum rate will generally apply. Beginning in 2013, however, those who pay tax at the higher 39.6% federal income tax rate (i.e., individuals with income that exceeds $400,000, or married couples filing jointly with income that exceeds $450,000) will be subject to a maximum rate of 20% for long-term capital gain and qualifying dividends.

Interestingly the Bush tax cuts were made permanent for everyone else - no more reauthorization necessary. It seemed like the economy was just fine before those tax cuts were implemented, not sure why they'd be made permanent now. IIRC the first round of the temporary Bush cuts was in response to the surplus coming out of the Clinton era - giving people their money back. Then the second round was in response to a relatively small recession (was that 2003?). So if you temporarily cut taxes for no other reason than to get rid of a surplus in the Federal Budget due to an economic boom, what should you do when a huge deficit develops a decade later? Make the cuts permanent???? Cut them more???? And how does a conservative movement calling themselves Taxed Enough Already gain momentum in those circumstances??? It's all so very irrational.