The Fiscal Cliff Approacheth

[Direckshun]

In an effort to make this thread sticky-worthy, I am going to update this OP to keep casual glancers informed.

This post is the official one-stop shopping of the key points/developments of the fiscal cliff negotiations.

Far as I understand, the fiscal cliff:

1. Gets rid of the Bush tax cuts for the wealthy.
2. Gets rid of the Bush tax cuts for everybody else.
3. Slashes defense spending by something like $500 billion.
4. Slashes domestic programs like the NIH, Head Start, and medicine/drug care for the poor by $500 billion.

The new idea is for Democrats to allow the cliff to hit, then immediately introduce a bill that would bring 2, 4, and some of 3 back. But not 1.

Here is a chart detailing exactly what the fiscal cliff is going to do, financially:

Spoiler!

Originally Posted by Direckshun

New CBO projection: if the fiscal cliff hits, we are in another recession, and lose two million jobs.

http://www.reuters.com/article/2012/...87L0JV20120822

The poor would be hurt by the fiscal cliff:

Originally Posted by Direckshun

Overall, if the tax breaks from the 2009 stimulus are allowed to expire—the EITC and Child Tax Credit expansions, along with American Opportunity Credit for college tuition—the poorest 20 percent of Americans would see their taxes go up by $209 on average, reducing their after-tax income by 1.9 percent, according to the Tax Policy Center.

As would the middle class:

Originally Posted by Direckshun

According to estimates by the Tax Policy Center, more than half of all married couples will owe an additional tax of around $4,000 unless Congress acts. And more than a third of families with children will fall subject to the AMT, with parents of three or more children facing an extra tax of $4,700.

Among married couples with at least two children and adjusted gross income between $75,000 and $100,000, the center estimates that 84 percent will face a significantly higher tax bill this year because of the AMT.

There seems to be some consensus between the parties that substantial revenues want to be raised. Boehner and the GOP hopes that's through limiting tax deductions rather than tax raises.

Obama's opening offer, essentially:

• Allow the Bush tax cuts on high earners to expire. $849 billion
• Limit itemized deductions to 28 percent, close some loopholes and deductions on high earners, eliminate tax breaks for oil and gas companies, eliminate the carried interest loophole, plus a few other items. $584 billion
• Create a special "Buffett Rule" tax rate for millionaires. $47 billion
• Restore the estate tax to 2009 levels. $143 billion
• Limit corporate income shifting to low-tax countries. $148 billion
• Other miscellaneous tax increases and reductions. About -$200 billion
• Total: $1.6 trillion

[BucEyedPea]

Originally Posted by alnorth

Obama was not shy about raising taxes, it was one of the centerpieces of his campaign. Thats what the people voted for, and he has the mandate. The Republicans would have lost the house too if they did not have the enormous advantage of redistricting following the 2010 wave.

If the GOP wont budge from letting the top bracket go to Clinton-era rates, then Obama will probably let the tax cuts expire, and THEN talk about tax cuts with the GOP.

The Republicans have no leverage. Zero, none whatsoever.

He wasn't shy about raising taxes on the rich. I mean of course people will vote for someone else footing the bill. Look what happened in CA, they voted for tax increase but those who voted for it voted for others to pay for it. That's called corruption. Socialism corrupts the people.

There are just not enough wealthy to pay for it all. Everyone should pay something down to the lowest level. That would lead to real reform in all the spending. Well, except for the Fed reducing everyone's paychecks which helps the rich and hurts everyone else. This is what creates the wider income gap too.

[BucEyedPea]

Originally Posted by alnorth

Obama was not shy about raising taxes, it was one of the centerpieces of his campaign. Thats what the people voted for, and he has the mandate. The Republicans would have lost the house too if they did not have the enormous advantage of redistricting following the 2010 wave.

If the GOP wont budge from letting the top bracket go to Clinton-era rates, then Obama will probably let the tax cuts expire, and THEN talk about tax cuts with the GOP.

The Republicans have no leverage. Zero, none whatsoever.

He wasn't shy about raising taxes on the rich. I mean of course people will vote for someone else footing the bill. Look what happened in CA, they voted for tax increases, but those who voted for it voted for others to pay for it. That's called corruption. Socialism corrupts the people.

There are just not enough wealthy to pay for it all. Everyone should pay something down to the lowest level. That would lead to real reform in all the spending. Well, except for the Fed reducing everyone's paychecks which helps the rich and hurts everyone else. This is what creates the wider income gap too.

[Direckshun]

More and more commentators seeing successful negotiations as feasible.

http://www.economist.com/blogs/freee...cliff?fsrc=rss

How to solve the fiscal cliff: The Obamney tax plan
by G.I.
Nov 8th 2012, 23:33

PRESIDENTS choose their words carefully. So when Barack Obama talked of “tax reform” but not “tax rates” in his acceptance speech early Wednesday, he was presumably sending a signal. And it was similarly significant that later that day John Boehner repeatedly stated his opposition to higher tax “rates” rather than tax revenue.

Within those two statements lies the nucleus of a deal: raising tax revenue through some means other than higher tax rates. There are myriad ways of doing this; the trick is to find one that both Democrats and Republicans can live with. During the supercommittee negotiations last year, Senator Pat Toomey proposed raising $250 billion in revenue over 10 years by closing loopholes. But he would also have cut rates sharply, which would have benefited the richest households most. That was anathema to Democrats; they wanted more revenue, but not if it made the tax system less progressive.

So the price for Democrats is that tax reform must be progressive: after-tax incomes of people at the top must be squeezed more than for people at the middle. Thus far, Mr Obama has equated that with allowing the top two income tax brackets to return to their pre-2001 levels. But there is an alternative route to the same goal that does not require higher rates, and it comes courtesy of Mitt Romney. Recall that when asked how he would pay for a 20% cut to marginal rates, he proposed a cap on deductions, an idea proposed in 2011 by Martin Feldstein, Maya MacGuineas and Daniel Feenberg.

I don't have a ready estimate of how much capping deductions for those earning more than $250,000 would raise. But you can ballpark it by looking the Tax Policy Center's estimates for capping itemized deductions at $50,000. It would raise $749 billion over 10 years, within the $800 billion that Mr Boehner has previously agreed to. That’s also more than the $429 billion yielded from returning the two top rates to their pre 2001 levels. The appeal for Republicans is that no one’s rates go up, and the preferential rate for capital gains and dividends is preserved. The appeal for Mr Obama is that it is highly progressive. According to the TPC, less than 1% of the bottom 60% of households would pay more tax while the top 1% would pay 79% of the additional revenue. The average tax rate for the bottom 60% wouldn’t change, while it would go up 2 percentage points for the top 1%. It's worth noting that Mr Obama’s budgets proposed capping the value of deductions for upper income households at 28%, which would have raised $584 billion over 10 years. Prior to 2001, the personal exemption and itemized deductions phased out for upper income taxpayers; those phaseouts were eliminated by the Bush tax cuts. Mr Obama's budget would reinstate them, raising $164 billion over a decade. (These provisions would raise considerably less revenue if the two top rates did not go up.)

Would such a deal fly? One source close to House Republicans tells me: “I think they'd take it; they're holding no cards at the moment… The capping of deductions would be very magnaminous and a good way to lay the groundwork for negotiating real tax reform.” But, he adds, “I don't think Obama would offer that—why not fall back to Reid-Pelosi and increase it on people making over $1 million and dare house Republicans to walk away from that? Sacrificing the chance to earn political points will be very difficult for Democrats to do.”

On the other hand, Harry Reid and Nancy Pelosi, though unhappy to be excluded from Mr Obama’s grand bargain negotiations with John Boehner in 2011, seemed ready to fall in line with a deal that met Mr Obama's conditions. So the bigger question is whether this sort of deal qualifies: is Mr Obama prepared to let the lower rates stay in place if he can get the revenue by other means? One former Administration official thinks he would: “Obama's budget likes the idea of capping deductions at 28 percent," and this would be an even lower cap. "The problem is that it hurts both housing and charities. Both are powerful constituencies. And housing is fragile at the moment and phase-in would still roil real estate. Also at what level of income? Lots of Congressional Democrats want the bracket at $1 million, not $250,000.” He also thinks Democrats would want to raise rates on capital gains, which is a bigger deal to Republicans than income tax rates.

Agreement on taxes constitutes only half of a deal. Republicans will accept higher tax revenue only if accompanied by spending cuts. Mr Obama is okay with cuts, but perhaps not the cuts to entitlements that Republicans want.

But it’s quite possible that the two could start out small with more modest caps on deductions and cuts to discretionary spending with cosmetic trimming of health care entitlements - enough to justify extending the lower tax rates for a year and delaying the sequester of automatic spending cuts. It would be a down payment on a more ambitious plan next year.

Both Mr Obama and Mr Boehner say they are not as far apart as people think. It's encouraging that neither laid down markers that the other side can't stomach; we'll see if Mr Obama maintains that openness in an address on the economy scheduled for Friday. He has previously said he would reach out to Mr Romney for ideas; he could do worse than to adopt this one.

[mlyonsd]

Originally Posted by Direckshun

More and more commentators seeing successful negotiations as feasible.

http://www.economist.com/blogs/freee...cliff?fsrc=rss

How to solve the fiscal cliff: The Obamney tax plan
by G.I.
Nov 8th 2012, 23:33

PRESIDENTS choose their words carefully. So when Barack Obama talked of “tax reform” but not “tax rates” in his acceptance speech early Wednesday, he was presumably sending a signal. And it was similarly significant that later that day John Boehner repeatedly stated his opposition to higher tax “rates” rather than tax revenue.

Within those two statements lies the nucleus of a deal: raising tax revenue through some means other than higher tax rates. There are myriad ways of doing this; the trick is to find one that both Democrats and Republicans can live with. During the supercommittee negotiations last year, Senator Pat Toomey proposed raising $250 billion in revenue over 10 years by closing loopholes. But he would also have cut rates sharply, which would have benefited the richest households most. That was anathema to Democrats; they wanted more revenue, but not if it made the tax system less progressive.

So the price for Democrats is that tax reform must be progressive: after-tax incomes of people at the top must be squeezed more than for people at the middle. Thus far, Mr Obama has equated that with allowing the top two income tax brackets to return to their pre-2001 levels. But there is an alternative route to the same goal that does not require higher rates, and it comes courtesy of Mitt Romney. Recall that when asked how he would pay for a 20% cut to marginal rates, he proposed a cap on deductions, an idea proposed in 2011 by Martin Feldstein, Maya MacGuineas and Daniel Feenberg.

I don't have a ready estimate of how much capping deductions for those earning more than $250,000 would raise. But you can ballpark it by looking the Tax Policy Center's estimates for capping itemized deductions at $50,000. It would raise $749 billion over 10 years, within the $800 billion that Mr Boehner has previously agreed to. That’s also more than the $429 billion yielded from returning the two top rates to their pre 2001 levels. The appeal for Republicans is that no one’s rates go up, and the preferential rate for capital gains and dividends is preserved. The appeal for Mr Obama is that it is highly progressive. According to the TPC, less than 1% of the bottom 60% of households would pay more tax while the top 1% would pay 79% of the additional revenue. The average tax rate for the bottom 60% wouldn’t change, while it would go up 2 percentage points for the top 1%. It's worth noting that Mr Obama’s budgets proposed capping the value of deductions for upper income households at 28%, which would have raised $584 billion over 10 years. Prior to 2001, the personal exemption and itemized deductions phased out for upper income taxpayers; those phaseouts were eliminated by the Bush tax cuts. Mr Obama's budget would reinstate them, raising $164 billion over a decade. (These provisions would raise considerably less revenue if the two top rates did not go up.)

Would such a deal fly? One source close to House Republicans tells me: “I think they'd take it; they're holding no cards at the moment… The capping of deductions would be very magnaminous and a good way to lay the groundwork for negotiating real tax reform.” But, he adds, “I don't think Obama would offer that—why not fall back to Reid-Pelosi and increase it on people making over $1 million and dare house Republicans to walk away from that? Sacrificing the chance to earn political points will be very difficult for Democrats to do.”

On the other hand, Harry Reid and Nancy Pelosi, though unhappy to be excluded from Mr Obama’s grand bargain negotiations with John Boehner in 2011, seemed ready to fall in line with a deal that met Mr Obama's conditions. So the bigger question is whether this sort of deal qualifies: is Mr Obama prepared to let the lower rates stay in place if he can get the revenue by other means? One former Administration official thinks he would: “Obama's budget likes the idea of capping deductions at 28 percent," and this would be an even lower cap. "The problem is that it hurts both housing and charities. Both are powerful constituencies. And housing is fragile at the moment and phase-in would still roil real estate. Also at what level of income? Lots of Congressional Democrats want the bracket at $1 million, not $250,000.” He also thinks Democrats would want to raise rates on capital gains, which is a bigger deal to Republicans than income tax rates.

Agreement on taxes constitutes only half of a deal. Republicans will accept higher tax revenue only if accompanied by spending cuts. Mr Obama is okay with cuts, but perhaps not the cuts to entitlements that Republicans want.

But it’s quite possible that the two could start out small with more modest caps on deductions and cuts to discretionary spending with cosmetic trimming of health care entitlements - enough to justify extending the lower tax rates for a year and delaying the sequester of automatic spending cuts. It would be a down payment on a more ambitious plan next year.

Both Mr Obama and Mr Boehner say they are not as far apart as people think. It's encouraging that neither laid down markers that the other side can't stomach; we'll see if Mr Obama maintains that openness in an address on the economy scheduled for Friday. He has previously said he would reach out to Mr Romney for ideas; he could do worse than to adopt this one.

Doesn't sound like your guy got the memo.

[Direckshun]

Originally Posted by mlyonsd

Doesn't sound like your guy got the memo.

Come again?

[mlyonsd]

Originally Posted by Direckshun

Come again?

This afternoon Obama doubled down on passing tax hikes for the wealthy.

[jiveturkey]

Originally Posted by mlyonsd

This afternoon Obama doubled down on passing tax hikes for the wealthy.

Isn't that what he's been selling throughout the campaign?

[Taco John]

Originally Posted by Direckshun

The new idea is for Democrats to allow the cliff to hit, then immediately introduce a bill that would bring 2, 4, and some of 3 back. But not 1.

Brinksmanship at its finest!

[Taco John]

Let's see... Raise taxes on everyone across the board. Cut spending across the board.

What's all the panic about?

[patteeu]

Originally Posted by alnorth

Obama was not shy about raising taxes, it was one of the centerpieces of his campaign. Thats what the people voted for, and he has the mandate. The Republicans would have lost the house too if they did not have the enormous advantage of redistricting following the 2010 wave.

If the GOP wont budge from letting the top bracket go to Clinton-era rates, then Obama will probably let the tax cuts expire, and THEN talk about tax cuts with the GOP.

The Republicans have no leverage. Zero, none whatsoever.

We'll see. You forget how bad a leader the President can be. Nancy Pelosi doesn't have any ability to help him now.

I think it's very possible that the Republican House will be able to win public support by offering to increase revenues from the rich by closing loopholes instead of raising rates. Afterall, this was the suggestion of the President's own, bipartisan deficit commission (Bowles-Simpson).

[Comrade Crapski]

This will give you all an idea what Benghazi Barry's second term will be like:

http://www.youtube.com/watch?feature...&v=whVSw5X2pVU

Of course, the big difference will be we are armed, while the people of Argentina were not.

[|Zach|]

Originally Posted by Chicken.Hawk61

This will give you all an idea what Benghazi Fece's second term will be like:

http://www.youtube.com/watch?feature...&v=whVSw5X2pVU

Of course, the big difference will be we are armed, while the people of Argentina were not.

Yea, we have heard your predictions before...

[Direckshun]

Democrats reportedly getting more and more comfortable with letting the fiscal cliff hit.

http://thehill.com/blogs/blog-briefi...ng-unfair-deal

Sen. Murray: Dems would let Bush-era rates expire before taking ‘unfair deal’
By Meghashyam Mali
11/11/12 11:32 AM ET

Sen. Patty Murray (D-Wash.) on Sunday said Democrats were prepared to allow the expiration of all George W. Bush-era tax rates if Republican lawmakers objected to raising taxes on the wealthiest.

“We can't accept an unfair deal that piles on the middle class and tell them they have to support it. We have to make sure that the wealthiest Americans pay their fair share,” said Murray on ABC”s “This Week.”

Murray said one option would be to let the lower rates expire across-the-board and then return to the table next year with new talks on a tax-cut package.

“So if the Republicans will not agree with that, we will reach a point at the end of this year where all the tax cuts expire and we'll start over next year. And whatever we do will be a tax cut for whatever package we put together. That may be the way to get past this,” said Murray.

The Washington senator is likely to become chairwoman of the Senate Budget Committee and previously served on the congressional “supercommitee,” which failed to finalize a deficit-reduction plan, which may trigger sequestration cuts in January 2013.

Economists warn that the tax-rate rises and automatic spending cuts could bring another recession and both parties have said they hope to avoid the so-called “fiscal cliff.”

“Look, no one wants to go off the fiscal cliff. But a fair deal is absolutely critical here,” said Murray on Sunday.

President Obama and Democrats have called for raising taxes on the wealthy to pay for the deficit-reduction plan, while Republicans want to extend the lower-Bush era rates across-the-board.

The president will meet with lawmakers next week to begin talks on a deal and said he was “encouraged” last week when House Speaker John Boehner (R-Ohio) said Republicans were open to new revenues in any such deal.

Appearing with Murray, Sen. Saxby Chambliss (R-Ga.) praised Boehner. “I thought he showed great leadership by saying that revenues need to be on the table,” said Chambliss.

But Chambliss cautioned that new revenues needed to be matched with measures reforming entitlement programs and said the Bowles-Simpson model could provide a template for negotiators.

“Bowles-Simpson said, look, eliminate all these tax credits and tax deductions. You can generate somewhere 1 to 1.2 trillion in additional revenue. You can actually lower tax rates by doing that,” said Chambliss.

[BucEyedPea]

Originally Posted by Tom.Jay61

This will give you all an idea what Benghazi Fece's second term will be like:

http://www.youtube.com/watch?feature...&v=whVSw5X2pVU

Of course, the big difference will be we are armed, while the people of Argentina were not.

Not if Fast Tracking that arms treaty goes through.

[BucEyedPea]

The best move is for the House to do nothing.