Mon Nov 12, 2012, 03:53 PM
JRLeft (2,598 posts)
Why Washington’s “Fiscal Cliff” is a Myth
They don’t call it the “cliff” for nothing. It’s the fiscal spot where a nation’s representatives can gather and cry doom. It’s the place — if Washington is to be believed — where, with a single leap into the Abyss of Sequestration, those representatives can end it all for the rest of us.
In the wake of President Obama’s electoral victory, that cliff (if you’ll excuse a mixed metaphor or two) is about to step front and center. The only problem: the odds are no one will leap, and remarkably little of note will actually happen. But since the headlines are about to scream “crisis,” what you need to understand American politics in the coming weeks of the lame-duck Congress is a little guide to reality, some Cliff Notes for Washington.
As a start, relax. Don’t let the headlines get to you. There’s little reason for anyone to lose sleep over the much-hyped fiscal cliff. In fact, if you were choosing an image based on the coming fiscal dust-up, it probably wouldn’t be a cliff but an obstacle course — a series of federal spending cuts and tax increases all scheduled to take effect as 2013 begins. And it’s true that, if all those budget cuts and tax increases were to go into effect at the same time, an already weak recovery would probably sink into a double-dip recession.
But ignore the sound and fury. While prophecy is usually a perilous occupation, in this case it’s pretty easy to predict how lawmakers will deal with nearly every challenge on the president’s and Congress’s end-of-year obstacle course. The upshot? The U.S. economy isn’t headed over a cliff any time soon.
3 replies, 1121 views
Always highlight: 10 newest replies | Replies posted after I mark a forum
Replies to this discussion thread
Why Washington’s “Fiscal Cliff” is a Myth (Original post)
|Filibuster Harry||Nov 2012||#3|
Response to JRLeft (Original post)
Mon Nov 12, 2012, 04:14 PM
Filibuster Harry (655 posts)
3. All retroactive
It will be interesting to see how this works out though. We have tax rates increasing and tax credits expiring. It would be very interesting if someone, anyone , could at least explain some specifics if nothing is agreed upon: for instance, dividends would be taxed at ordinary rates (not 0% or 15% maximum); american opportunity credit (maximum of $ 2,500.-) would expire.
Pressure is on both the white house and the house of representatives. In my opinion, it is more on the house since the president was re-elected. And his plan, as I understand it, would keep the dividends tax rate at 15% and 20% while increasing the higher tax rates from 33% and 35% to 36% and 39.5% respectively. Now he could compromise and raise the rates but to a lower rate.
The house republicans depending on what happens could be blamed for raising taxes on everybody (a sure problem in the 2014 election) or raise taxes on the wealthy (a sure primary from the tea party and Grover).
2 years ago the president was in this same situation with the Rs holding unemployment benefits hostage to keeping lower tax rates. Raising rates would have been a sure loss for the president. But now he is re-elected and the people believe tax rates at the high end must go up as well as spending cuts in order to tackle the deficit. The Rs never saw this coming. They better get their act together and stand up to Grover in numbers.
If they don't pass anything they can always do it in January and retroactively -- a good way out.