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The Fiscal Cliff Compromise

13 Nov

With just 7 weeks left, Congress is faced with a choice of what to do over the looming “Fiscal Cliff”.  The ”Fiscal Cliff” is comprised of a combination of mandatory spending cuts and the expiration of the Bush Tax Cuts.  All of these are set to happen at the same time.  This is a result of the deal struck in 2011 by Congress during the the debt ceiling debates.  The purpose of this measure was to ensure that neither side would wait until now to address the issues it faced.  Rather the hope at the time was that Congress would have addressed the issue before the country faced this challenge and would have come up with a plan to cut the deficit, as well as, found a suitable tax substitute for the expiring tax cuts.

In reality, what we have seen is partisan grandstanding and a childish game of chicken.  This is the same kind of behavior that caused the first credit downgrade in U.S. history.  The downgrade was not done because of the deficit or the total U.S. debt.  It was done as a result of the instability in the U.S. Government.  This instability is the same that we face today and the same we will likely face when the new Congress begins session in 2013.

The key issues separating the side are simple, yet divisive.  The GOP refuses to support tax increases and demands deficit reduction.  The Democrats demand tax increases on the wealthy and refuse to allow reductions to social program spending.  There you have it, that is what separates the two sides.

So what’s at stake if the “Fiscal Cliff” is allowed to happen?

Spending will be slashed dramatically, taxes will rise and the country will likely slip into recession (see chart below for breakdown).  To the average person, this is a no brainer.  To a politician it is not that simple.  Many Republicans in Congress have pledged not to raise taxes.  Others have made promises to reduce the deficit.  These too seem important and many support these things.  Democrats have also promised to reduce deficit spending, but see a different path than Republicans since they are not tied down to a no tax increase pledge.

One more thing, we still must raise the debt ceiling if we want to continue funding the government.  This must happen regardless whether we go over the ”Fiscal Cliff” or not.

If the country is allowed to go over the “Fiscal Cliff”, the impact could be disastrous   Allowing the Bush Tax Cuts to expire, especially on the middle class, would plunge the country’s flagging economy into turmoil.  The spending cuts would also produce a nightmare scenario.  Together, the rise in taxes and the spending cuts would eliminate approximately $600 billion from the economy which would surely drag it back into recession.  

Below is a chart from the non-partisan Congressional Budget Office outlining the potential impacts each portion of the “Fiscal Cliff” would have on the economy.

So what are the options for this Lame-Duck Congress?

Well this depends on who you talk to.  Republicans maintain the plan put forth by Paul Ryan (R-WI), which maintains that you can close loopholes to make up for the revenue needed to avoid the ”Fiscal Cliff” while decreasing the deficit.  This sounds great, except it could potentially jeopardize loopholes and deductions used by middle-class families who rely on those deductions to survive.

Democrats maintain that taxes must be raised on the wealthy in order to reduce the deficit and avoid the ”Fiscal Cliff”.  Republicans won’t support this plan, because it requires that taxes be increased (something that goes against their pledge).

President Obama has already addressed the country telling Congress to get to work on a bill that will avoid the ”Fiscal Cliff”, but clearly stated that he would not sign a bill that gave tax breaks for the wealthy.

It seems as if we have an impasse.  Recently there has been a new option that has come to light.  One that Mitt Romney supported and one that was introduced by the Obama Administration during their failed attempt to fund and pass the American Jobs Act.  This option caps all tax deductions at $50,000 for all.  This would allow any money the government to keep any money not refunded back to tax payers (above the $50,000 in deductions).  For middle class families, this would have little to no impact on their taxes (as can be seen by the graph below).

This option might be a possible path to compromise for Republicans and Democrats.  The increase the Democrats seek would be accounted for using this method and the Republicans could seek shelter here because they wouldn’t technically have agreed to a new tax increase.  This would simply be a reform to the tax code that achieved the same methods of raising taxes without actually doing so.  Of course the Bush Tax Cuts would need to be renewed for all if this method were to be used so this would call for Democrats to come off of their hard lined stance on tax cuts for the wealthy.  The debt ceiling would also have to be increased, but would play a minor role if plans for deficit reduction and taxes can be worked out.

Congress is likely to pursue the latter method, as it is more likely to receive bi-partisan support.  It will not be a surprise, however; if the Republicans and Democrats argue up until the eleventh hour again.



9 Nov


bullet dodgedO hai Romney transition website developer! Did you know that if you have a website you do not yet want people to see yet, you can hide it? Like, you could put up a splash page that says “coming soon,” with kittens with googly eyes, or you could just have it in development pages and not actually published to the Internet! We do not blame you, web development is hard! You know: UNLESS IT IS YOUR JOB TO DEVELOP THE WEB. Here are some screenshots of the Romney transition website, which unaccountably was live for the whole Internet (but especially Taegan Goddard at Political Wire) to see! It was here an entire day after Miffed “47 percent” Romney shit the electoral bed! We especially like the ones we are gonna show you after the jump!

We are not saying Mitt Romney should not have had someone working on a transition website! It is important to have your ducks in a row! It is just that, as with every other single thing on his campaign, they did a piss-poor job, and now we have no choice but to laugh at them. MITT ROMNEY WHY ARE YOU SO BAD AT THIS?

This “Join the Administration” page is the funniest one. Like, did you know it is not always awesome buying yourself a cabinet position or whatever?

Wait a minute, what did it just say?

Hahaha, it said you have to show your taxes and stuff. AS IF! From now on, no presidential candidate will ever have to show her taxes, due to the precedent set by Mr. Senor Romney, unless of course she actually would like to win.

Final battleground snapshot, and my predictions!

5 Nov

by kos

U.S. President Barack Obama addresses thousands of supporters in Madison, Wisconsin November 5, 2012, on his last day of campaigning.  REUTERS/Larry Downing

Victory’s eve.

As always, these are the TPM polling composites, comparing the trendlines from last Wednesday.

You’ll be glad to know that this battleground snapshot, the 31st I’ve written this year, is it. We’re done. Tomorrow, we’ll have real results, and the day can’t have come any sooner.

Particularly since President Barack Obama is winning handily.

Florida is about the only state where Obama lost ground, while he surged in Wisconsin. Everywhere else, the movement was incremental, and mostly in the president’s direction. And note—Obama’s deficit in Florida and North Carolina is smaller than the deficit in any of these other battleground states. And with undecideds breaking to Obama, Romney’s got zero room to grow.

Head below the fold for my predictions. Hint, it’s a 332-206 Obama victory.

Open thread: Will Ferrell will do anything to get you to vote

5 Nov




by Barbara Morrill

Pointing Toward Prosperity?

27 Oct

Paul Krugman
New York Times

Mitt Romney has been barnstorming the country, telling voters that he has a five-point plan to restore prosperity. And some voters, alas, seem to believe what he’s saying. So President Obama has now responded with his own plan, a little blue booklet containing 27 policy proposals. How do these two plans stack up?

Well, as I’ve said before, Mr. Romney’s “plan” is a sham. It’s a list of things he claims will happen, with no description of the policies he would follow to make those things happen. “We will cut the deficit and put America on track to a balanced budget,” he declares, but he refuses to specify which tax loopholes he would close to offset his $5 trillion in tax cuts.

Actually, if describing what you want to see happen without providing any specific policies to get us there constitutes a “plan,” I can easily come up with a one-point plan that trumps Mr. Romney any day. Here it is: Every American will have a good job with good wages. Also, a blissfully happy marriage. And a pony.

So Mr. Romney is faking it. His real plan seems to be to foster economic recovery through magic, inspiring business confidence through his personal awesomeness. But what about the man he wants to kick out of the White House?

Well, Mr. Obama’s booklet comes a lot closer to being an actual plan. Where Mr. Romney says he’ll achieve energy independence, never mind how, Mr. Obama calls for concrete steps like raising fuel efficiency standards. Mr. Romney says, “We will give our fellow citizens the skills they need,” but says nothing about how he’ll make that happen, pivoting instead to a veiled endorsement of school vouchers; Mr. Obama calls for specific things like a program to recruit math and science teachers and partnerships between businesses and community colleges.

So, is Mr. Obama offering an inspiring vision for economic recovery? No, he isn’t. His economic agenda is relatively small-bore — a bunch of modest if sensible proposals rather than a big push. More important, it’s aimed at the medium term, the economy of 2020, rather than at the clear and pressing problems of the present.

Put it this way: If you didn’t know what was actually going on in the U.S. economy, you’d think from reading the Obama plan that America was a place where workers with the right skills were in high demand, so that our big problem was that not enough people have those skills. And five or 10 years from now, America might actually look like that. Right now, however, we’re still living in a depressed economy offering poor prospects for almost everyone, including the highly educated.

Indeed, these have been really bad years for recent college graduates, who all too often can’t find anyone willing to make use of their hard-won skills that were expensive to attain. Unemployment and underemployment among recent graduates surged between 2007 and 2010, while far too many highly trained young people found themselves working in low-skill jobs. The job market for skilled workers, like that for Americans in general, is now gradually improving. But it’s still far from normal.

The point is that America is still suffering from an overall lack of demand, the result of the severe debt and financial crisis that broke out before Mr. Obama took office. In a better world, the president would be proposing bold short-term moves to move us rapidly back to full employment. But he isn’t.

O.K., we all understand why. Voters have been told over and over again that the 2009 stimulus didn’t work (actually it did, but it wasn’t big enough), and a few days before a national election is no time to try to change that big a false belief. So all that the administration feels able to offer are measures that would, one hopes, modestly accelerate the recovery already under way.

It’s disappointing, to be sure. But a slow job is better than a snow job. Mr. Obama may not be as bold as we’d like, but he isn’t actively misleading voters the way Mr. Romney is. Furthermore, if we ask what Mr. Romney would probably do in practice, including sharp cuts in programs that aid the less well-off and the imposition of hard-money orthodoxy on the Federal Reserve, it looks like a program that might well derail the recovery and send us back into recession.

And you should never forget the broader policy context. Mr. Obama may not have an exciting economic plan, but, if he is re-elected, he will get to implement a health reform that is the biggest improvement in America’s safety net since Medicare. Mr. Romney doesn’t have an economic plan at all, but he is determined not just to repeal Obamacare but to impose savage cuts in Medicaid. So never mind all those bullet points. Think instead about the 45 million Americans who either will or won’t receive essential health care, depending on who wins on Nov. 6.