Since the Senate passed its 157-page fiscal cliff monstrosity this morning by a vote of 89-8, it is practically a done deal that the House will do likewise today or before noon Wednesday.
Much was made of the fact income taxes will be going up only for those couples earning more than $450,000. Little was noted about the fact that every wage earner will take a 2 percent haircut because the payroll tax holiday was allowed to expire — $125 billion a year sucked right out of the private sector. And the 5-point hike in the capital gains tax was ignored by many media sources, as was the increase in the death tax rate. The revenues from all of those will be less than projected.
The bill extends unemployment benefits ($30 billion in deficit spending), doesn’t cut Medicare payments to doctors ($25 billion in deficit spending), even the wind energy production tax credit is extended a year ($12 billion in deficit spending). The costs of all of those will be greater than projected.
The Senate bill puts off addressing any spending cuts for two months.
Never mind that the nation hit the debt ceiling yesterday and the Treasury Department plans to skirt this with accounting tricks.
With this kind of “deal,” jobs will be lost and recession is nearly assured.
But hardly anyone is talking about the biggest tax of all that is looming like a dark storm cloud: Inflation — the most recessive tax hike of all, the one that hits the poorest the hardest but also hits everyone. We can’t continue to print money and expect it to hold its value.
The CBO says the bill adds $4 trillion to the deficit: American Taxpayer Relief Act
I am a fan of your blog. I think if you dig into monetary policy, you will find a lot of these bills have no impact on monetary policy. Some crucial values are the bond market…healthy….amount banks have on hand to lend…healthy….there are many, many more factors that Economists look at to determine money supply…..our supply right now looks just about like it did when we turned the corner in the 30′s…….so I think using the dumbed down budget and monetary policy is really apples and oranges….just one opinion…i just find it frustrating how often people mix up monetary and tax policy…GDP, interest rates etc. etc…you can’t even have a decent conversation without considering at least 18 variables. Printing money may or may not devalue the currency…which has plusses and minuses galore when you consider import and exports….of course that’s why your column about Politics, Economics and Social issues was so relevant…and why we should follow the constitution, yet move to a slightly more modern version encouraging 3 parties
The debt will increase as our credit worthiness falters.
The professional politicians in both parties are disgraceful and insulting to ALL citizens. The good new is the folks are getting wise to their con game. DC drama, that’s all this is.
I believe the ‘plan’ is to push the dollar to the limit and then just let it go. there really is no saving a currency already present is such abundance. With a quadrillion in derivatives and less than 100 trillion in real goods the end of the dollar is coming (if not near). We shall see the Fed substitute cash (or the commitment to print cash in the form of reserves with the Fed) for all the failing credit instruments, thus prevent the nominal failure of bonds for as long as the market will tolerate. and then….? Kyle Bass has stated, after discussion with high ranking officials (at treasury I believe) that this is in fact the plan. If there really was a way to right the ship surely there would be some real effort to do so . The current ‘Cliff’ efforts are not a realistic attempt at getting us back to GAAP reality.
Um, you guys opposed the extension of the payroll tax holiday. Obama was forced to concede to the Republicans on that.
And that big CBO deficit number you cite at the end comes from not letting all the tax cuts expire. Is that what you want?
Spending is important too. Wonder if any real cuts are coming in two months?
Earlier today, I went to The New Republic’s website to find an essay that Nyp recommended. On their main page, I saw headlines that read, “The Fiscal Cliff’s Biggest Winner May Be George W. Bush,” “Dear Democrats: Kill This Deal,” and “Democrats’ Cliff Compromise Is Bad, But the Strategic Consequences are Disastrous.”
I don’t really understand the negativity. This whole thing seems like a big victory for President Obama and the Democrats and a huge fiasco for the Republicans.
I quit the Republican Party in 2003 over the issue of Republican instigated and supported tax hikes at the state level (Guinn, Raggio). The recent incompetence of the national Republican leadership confirms that I did the right thing ten years ago.
Hard to say. We on the left are very conflicted as to whether this was a huge strategic mistake on Obama’s part. Paul Krugman, for example, fears that we have permanently lost the ability to fund the social programs that we liberals believe in:
http://krugman.blogs.nytimes.com/2013/01/01/perspective-on-the-deal/
http://krugman.blogs.nytimes.com/2012/12/31/conceder-in-chief-2/
So perhaps you shouldn’t be so despondent.
I’m not so despondent, Nyp, but here’s an update of an old joke.
If Obama, Biden, Reid, McConnell, Boehner and Pelosi were on a sinking ship, who would be saved?
The country.
Non Partisans need more conservatives, welcome to the free world Milty!
Not so true Nyp. Its not the “funding” that is important, its the actual paying that counts. I have no trouble with libby programs, hell I even think one or two of those actually good ideas
What I have lots of trouble with is how they are currently “funded” cause this “funding” does not actually pay the price..
The problem is that liberals like me. Eed more money with which to fund programs like Medicare, student loans, infastructure repair, etc. My fear is that ending the Bush cuts only for incomes over $450k won’t give us the money that we need. So there is still an opportunity for conservatives to “starve the beast.”
Still more worried about “funding” as opposed to paying. Find out how to pay for the programs and you will get conservative support.
How about that. The house passes the bill. The cliff is avoided. For two whole months. Then we get to have fun with spending and the debt ceiling. We are crisis budgeting the government. This is crazy, as we stand on the diving board, all we are really doing is building the diving board off the edge of the cliff and this time we actually had a running start.
This bill is a fart in a hurricane. We have entrenched obstacles that need to be removed, but probably never will. Health care costs, tax policy, Social Security and Medicare all come to mind. Until these elephants are removed, little progress will be made.
[...] House, as I predicted, went along with the Senate’s massive spending increase — $4 trillion in more deficit [...]
From DAVE444@wordpress.com
LIES… little ones, BIG ones, 1/2 ones, whoppers all with the same purpose
March 25, 2012
All lies have the same purpose and that is to avoid your knowing the truth about any particular subject. The trick of good liars is to make the lie sound plausible to you so that you accept it without question. If the liar is someone you have a belief in, for whatever reason, and the subject of the lie is something you are not very knowledgeable about or you have a preconceived idea about, then the liar’s task is that much easier. The liar merely tells you what you want to hear or bends the truth enough to make his comment sound plausible to you. In the course of spreading the lie the liar will rarely give facts that are easy to check. Soaring rhetoric and meaningless terms interspersed with the names of well known people and or institutions are intended to give credence to what is otherwise a collection of meaningless BS.
In any discussion of lies and liar’s it should be noted that with respect to governments and particularly the Feds, there is no penalty for an officer of the federal government telling you and thousands of others a bald face lie unless they are under oath. When is the last time you saw a fed under oath on TV or heard them on the radio? So beware when they speak to you. No matter what they say…There is NO free lunch. You may not be paying for it but someone is for sure.
Case in point as noted in today’s WSJ, Dave444, Obama called Tuesday night for “further reforms to our tax code so that the wealthiest corporations and individuals can’t take advantage of loopholes and deductions that aren’t available to most Americans.”
Then he signed a bill that included loopholes and deductions for wind energy, Hollywood, Nascar, tuna canners, biofuels, energy efficient appliances and homes, electric motorcycles, etc.
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And that has the effect of requiring us to use those things, whether we want them or not, because we are paying for them anyway.
Obama’s action is reasonable. I also want to get rid of tax deductions, but until the deductions disappear, I’m going to take them. Obama is willing to get rid of them, but until then, he’ll use them as politicians have for over a century.
Oops! I’m Anonymous.