The Fiscal Cliff thread.

[morris84]

Been reading the first one.

Wow. An op-ed piece that runs from untrue assertion to untrue assertion, to tell us all what a genius Ron Paul is, and why the entire budget problem is 100% due to social spending, and revenue and discretionary spending are completely irrelevant.

For example, I love the assertion that, since WW2, federal tax revenues have averaged a certain number, therefore tax rates have zero effect on revenue.

And oooh, look. The second op-ed is from exactly the same person, and makes exactly the same claims.

Let's go back to this article; http://www.zerohedge.com/news/2012-11-06/it-doesnt-matter.

What exactly in here is it that you disagree with and why? Is his "mathematical" explanation incorrect? If so, why?

[Larry]

Let's go back to this article; http://www.zerohedge.com/news/2012-11-06/it-doesnt-matter.

What exactly in here is it that you disagree with and why? Is his "mathematical" explanation incorrect? If so, why?

Well, let's see.

There's his assertion that presidential elections don't matter.

His claim that mandatory spending is automatic. (If that were true, there wouldn't be any debate about changing them, would there?)

The entire theme of his article: That changing revenue or discretionary spending don't matter.

Funny. I was under the impression that reducing discretionary spending by $1B, and reducing mandatory spending by $1B, had

exactly the same effect on the deficit

. $1B.

I observe that you didn't respond to the one specific item I already pointed out.

[morris84]

Well, let's see.

There's his assertion that presidential elections don't matter.

His claim that mandatory spending is automatic. (If that were true, there wouldn't be any debate about changing them, would there?)

The entire theme of his article: That changing revenue or discretionary spending don't matter.

Funny. I was under the impression that reducing discretionary spending by $1B, and reducing mandatory spending by $1B, had

exactly the same effect on the deficit

. $1B.

I observe that you didn't respond to the one specific item I already pointed out.

Alright, well, doesn't seem like you are going to address the main point of the article; which is that it is mathematically impossible for the government to get out of the debt hole that it is in, even if all of the programs that this article mentions were cut. The numbers don't lie, which is why the author stayed away from getting into the political part of the discussion, as it isn't even necessary to bring up to show that it's impossible for the government to get out of this mess.

[Larry]

Alright, well, doesn't seem like you are going to address the main point of the article; which is that it is mathematically impossible for the government to get out of the debt hole that it is in, even if all of the programs that this article mentions were cut.

Silly me. I thought the main point was, you know, the highlighted part at the top. The opening paragraph, and the title of the article.

You know. The part that states that Presidential elections don't matter.

But if you want, I'd be willing to discuss what you think is the important part of the article, instead.

Yes, if you believe the fiction that taxes cannot affect revenues (history says exactly the opposite, but lets ignore that), then it is a fact that completely eliminating discretionary spending, if done at a time when mandatory spending is temporarily, artificially inflated (because of the recession), and when revenues are at historical lows (because of the recession, and because of tax cuts), then the federal budget will not be instantly, completely balanced.

So what?

[morris84]

Silly me. I thought the main point was, you know, the highlighted part at the top. The opening paragraph, and the title of the article.

You know. The part that states that Presidential elections don't matter.

But if you want, I'd be willing to discuss what you think is the important part of the article, instead.

Yes, if you believe the fiction that taxes cannot affect revenues (history says exactly the opposite, but lets ignore that), then it is a fact that completely eliminating discretionary spending, if done at a time when mandatory spending is temporarily, artificially inflated (because of the recession), and when revenues are at historical lows (because of the recession, and because of tax cuts), then the federal budget will not be instantly, completely balanced.

So what?

I'm assuming that you don't know that even when tax rates were at their highest, it didn't mean that people were necessarily paying that much in taxes. So what the author of the article was showing was that it doesn't matter what rate the government sets rates at, they won't ever collect enough for it to make a difference. The point is that the government spends well beyond its means and is now at a point of no return. It will never be able to reverse what it has done because it is now in a position where it has to pay out (by law) more then it will ever be able to take in. Now the real craziness begins, which is no holds barred money creation and much more debt then we have ever seen. The amount of debt that was racked up in the last decade is going to be a drop in the bucket compared to what we are in store for.

[Jumbo]

Isn't Fiscal Cliff due north of Blind Man's Bluff?

[Thiebear]

Right now, the sides... while trying to say they want to cooperate are in actuality playing a game of chicken. The Republicans are used to the Democrats always blinking and turning away first. One thing has changed though... with Obama's victory, he never has to worry about election again... that allows him to play chicken with a whole different mindset.

I do expect both cars to veer before the collision or the cliff, but I expect they'll make it pretty close.

I thought it was Democrats are Lucy with the Football and the Repubs were Charlie Brown.

IF you give us the debt ceiling, we will give you a debt commission that will fix the debt, and if they fail we will cut xyz from the budgets.

Deal!

Commission never stands a chance, and we don't cut anything because it would "hurt" the people in power and a stagnant economy.

Don't even pass a real budget since the deal to go over and call it foolish during the election to have a budget as it will cost us seats.

2 years later:

What kind of deal will we cut now Lucy?

(does it matter, neither side will abide by it).

[Larry]

I'm assuming that you don't know that even when tax rates were at their highest, it didn't mean that people were necessarily paying that much in taxes.

I'm assuming that you don't know that the square root of 2 is approximately 1.414.

That doesn't have anything to do with what we're discussing, either. I just thought I'd throw that out there to sound patronizing.

So what the author of the article was showing was that it doesn't matter what rate the government sets rates at, they won't ever collect enough for it to make a difference.

No, what the author (and you) is claiming is that.

Showing implies that the author (and you) have created a chain of logical linkages which lead to his conclusions.

Since 1970, the Redskins have averaged scoring 37.4 points/game, thus scoring more points is irrelevant to winning games.

The first half of that statement is true. (Actually, I just made it up. Please pretend that it's true, though. It's an example) But it does not in any way even imply that the second half is true.

The point is that the government spends well beyond its means and is now at a point of no return.

No, the claim is.

The fact is that federal spending was at below historical averages for over a decade, before the recession caused a temporary spike.

It will never be able to reverse what it has done because it is now in a position where it has to pay out (by law) more then it will ever be able to take in.

I'm assuming that you don't know that laws change.

Now the real craziness begins, which is no holds barred money creation and much more debt then we have ever seen. The amount of debt that was racked up in the last decade is going to be a drop in the bucket compared to what we are in store for.

Dogs and cats. Living together. Mass hysteria!

---------- Post added November-19th-2012 at 05:08 AM ----------

Isn't Fiscal Cliff due north of Blind Man's Bluff?

I think it's both to the Left and the Right.

Some maps refer to it as the Cliffs of Insanity.

[Thiebear]

when we hit 18trillion (January) we will have no plan as we cut taxes on 250k and below and nothing on those above

when we hit 20trillion (November) we will be talking about what we can do about 1 month before it hits.

our leadership won't lead and hope that the economy fixes itself and thus the GDP can make it seem less important.

[artmonkforHOF]

Very American. Over-hyped, not much substance, sensationalism with a dash of fear mongering thrown in for good measure.

The fear is that with a combined $600billion on tax increases and spending cuts, a recession is looming. For a country with a $15trillion GDP that is 4% at most. You will never get everyone to pay all their taxes on time, I think the IRS take rate 12 months after filing is around 65%, and no way government spending gets cut to the rate predicted, even if there are cuts in one area, there will be overages in other areas.

Fear that taxing the wealthy would stunt investment & growth, that's a load of crap. Interest rates are so low, no one is spending their own money, or at least as little as possible, that's usually called good business.

I kinda hope this fiscal cliff comes and fizzles out like a dud firecracker. The only problem is, a lot of people with money who hate Obama for whatever reason, won't spend any in spite of him no matter what happens. They make stupid statements like Obamacare will cost my customers X more per product, or expansion will have to stop, they might even have to lay some workers off. Total crap, but guys who say stuff like this won't spend any money just so they can still cry broke.

Now, I have to get back to my own country that is paying 20% extra for public works projects, and my province that is spending at three times the rate they are taking in and has a worse debt to GDP ratio than California. I think they might push the age I collect my social pension to 95 if somebody doesn't do something soon. Every nation has their money problems, the "fiscal cliff" is pretty insignificant compared to say Greece, Spain, Italy or France. It will only get worse if partisan politics get in the way, time to stop blaming each other and drop any grudges, it's time to work together.

[Larry]

when we hit 18trillion (January) we will have no plan as we cut taxes on 250k and below and nothing on those above

Actually, I suspect that it's just about guaranteed that we're going to be raising taxes, by 2%, on all income below $110K.

Payroll taxes? I haven't even heard anybody mention them.

Whether there will be a tax increase on income above $250K? Not without one really big game of political chicken. (And my prediction is, the Dems will either lose, or cave, on that one.)

In short, from where I sit, tax hikes on the working are just about guaranteed. And tax hikes on "the rich" are almost impossible.

our leadership won't lead and hope that the economy fixes itself and thus the GDP can make it seem less important.

Fixing the economy and growing our way out of this is the only way it could possibly get better.

[HeluCopter29]

I thought it was Democrats are Lucy with the Football and the Repubs were Charlie Brown.

IF you give us the debt ceiling, we will give you a debt commission that will fix the debt, and if they fail we will cut xyz from the budgets.

Deal!

Commission never stands a chance, and we don't cut anything because it would "hurt" the people in power and a stagnant economy.

Don't even pass a real budget since the deal to go over and call it foolish during the election to have a budget as it will cost us seats.

2 years later:

What kind of deal will we cut now Lucy?

(does it matter, neither side will abide by it).

It sounds like you were trying to get on the Democrats asses, but you really just criticized the Republicans.

Correct me if I'm wrong.

---------- Post added November-19th-2012 at 09:21 PM ----------

Actually, I suspect that it's just about guaranteed that we're going to be raising taxes, by 2%, on all income below $110K.

Payroll taxes? I haven't even heard anybody mention them.

Whether there will be a tax increase on income above $250K? Not without one really big game of political chicken. (And my prediction is, the Dems will either lose, or cave, on that one.)

In short, from where I sit, tax hikes on the working are just about guaranteed. And tax hikes on "the rich" are almost impossible.

But Larry! The rich have the largest portion of wealth since the 20's and are getting the largest share of the new income by a long shot! They're just way to strained right now, and a tax hike could kill them!

[Thiebear]

Not really interested if it's Reid in the Senate

Or Boehner in the house

We won't do anything (AGAIN) and blame

The other while we hope the economy doesn't

Do what we expect.

That is not leadership, but it's what we voted for

So it's what we deserve

[The Evil Genius]

Are we writing in haiku format now? Cool.

Here's mine.

Dems want taxes raised

Mainly on the rich. No cuts.

GOP Boehner.

[deejaydana]

Not really interested if it's Reid in the Senate

Or Boehner in the house

We won't do anything (AGAIN) and blame

The other while we hope the economy doesn't

Do what we expect.

That is not leadership, but it's what we voted for

So it's what we deserve

This is spot on. When I look back at the campaign and what it became, I don't think EITHER candidate really delved deeply enough into what we're facing financially. Once the sugar rush wears off for the Obama team and the people who voted for him, we're still facing one helluva hangover. I don't see much political will by either side to take on our money problems.

[Fergasun]

I have a hard time keeping tabs on other threads in Tailgate, but figured this thread is worth a bump. Over the past couple of years I'd confess to being more of a slightly interested observer than strong partisan over a bunch of issues (it's true, right leaning to more left leaning). Just a couple of random thoughts in no particular order.

So it looks like the payroll tax holiday is going to end in another couple of weeks; why isn't Grover Norquist complaining about how that is a tax increase? This is a real 2% tax increase on the working poor/middle class. I still don't see why the same arguments don't hold true for carrying it forward (then again, with taxes, the same arguments will always hold true, putting more money into people's pockets).

I read somewhere on the Internet that "shared sacrifice" means the poor/middle class have to sell their kidney while the rich will have to refinance their yacht.

I can't help but laugh at the GOP as they try to frame this as an Obama issue. The deal was to come up with a deal the past 2 years; and since they haven't been able to make a deal, that means the sequestration goes into effect. BTW the GOP originally agreed to these cuts a couple years ago. I guess voters could be so stupid to believe that Obama single-handedly came up with the idea for sequestration years ago when he was the omnipotent executive.

There's a lot of fear from the left-side regarding Obama wanting to show that he's middle of the road and throwing middle class entitlements under the bus. I stand by my prediction made a couple weeks ago that entitlement reform is not going to be part of the fiscal cliff solution. Did anyone hear anything from Obama on entitlement reform during the election? If the Democrats do agree to any major entitlement reform, I'll eat my shoe... I just can't see it happening when there was no framework for discussion and I really don't see a large part of the country clamoring for it. It wasn't even a major part of the campaign (well Ryan-Romney were trying to make it a major part but failed). If the GOP were smart they would make a fiscal cliff deal and continue to spend the next 2 years convincing the country for the need for "entitlement reform" (although even calling it entitlement reform is a polite way of saying "social safety net").

I think there are 20-30 % of the population that thinks our large national debt is a real problem. I don't understand why $18T or $15T or $10T is the magic number. Why wasn't $5T the magic number years ago? What's wrong with $30T? No one has explained this. Wall Street CEOS are talking about how "debt is bad".... yes these same CEOs that have been funding private debt like crazy.

The way I view the debt (and debt hawks) is like this, and my view is biased because I'm on the younger side of the countries population. Our grandparents and parents had little problem benefiting from $5T, $10T, $15T in national debt. All of a sudden they want to cut it off in the name of us (the "how are my children and grandchildren going to pay for this!" argument); at the same time the younger folks are gettign screwed since we didn't get to benefit from being part of an economy with a large amount of government spending (couldn't you call that "stimulus"?). At the same time, they don't want to pay anything themselves (in fact but making the "over 55" exceptions to social security reforms they are exempting themselves from payments). That's my take, especially since I see very few young people calling the debt a real issue. If people/politicians/electorate really believed the national debt was a major issue, the GOP would've had major support for large-scale government shutdown years ago... I'm convinced people don't mind the government spending so much money.

In short, I'm going to be pissed that my parents and grandparents were able to build their personal wealth* from this "government inflated economy" and then turn around and say "tut, tut, tut my kids and grandkids... I'm going to shut off the spigot of government spending, and then call you lazy because you are unemployed.... all the while ignoring the fact that I've benefited over my entire life from government stimulus" (which is some of the narrative that I've seen from older generation when talking about young people unemployment and they seem oblivious to the fact that government spending helped the economy).

*And actually it's not even that much... my dad has a moderate 401(k), a moderate fed-gov retirement, and moderate level town-house in Tampa Florida.

[Fergasun]

Bump for some actual news. I managed to watch C-SPAN today which included a discussion with media and Bowles Simpson (some type of breakfast event), House GOP members (including the ever tan John Boehner and his number 1 pal Eric Cantor) and two members of the Democratic House Caucus (Becerra and Larson?). Bowles or Simpson raked the media for talking a lot about the tax portion, but not including the spending cuts when they talked about the fiscal cliff. Saying he'd like to see those topics coupled when talking about the solution. They both heaped praise on Dick Durbin and Tom Coburn, for being willing to compromise and seem to think that Obama is serious about getting something done that includes entitlement reform. Next Treasury Secretary is going to be Jack Lew (that's my prediction based on the fact he's part of these discussions... kind've like when Geithner was part of TARP from the beginning). Bowles says 1/3rd percent chance they get something done prior to end of the year, 1/3rd they get it done within the first week... there is going to be pain and it'll start to show up in employment, etc. now.

Boehner and the GOP came out against raising tax rates on the rich. The Democrats attacked them on that... although the Dems indicated everything should be on the table (and specifically exempted social security).

If these dummies can't get a framework for long-term debt deal, I don't know what.... Bowles attacking party loyalty over loyalty to country, he was even asked about Krugman and mentioned how he had to hold his tongue...

Looks like the Democrats will have to trade some benefit reform in order to raise tax rates on the rich...

[zoony]

At this point I think the Republicans have made it clear they will budge on taxes if Obama budges on entitlement reform. Doesn't sound like Geitners plan gave up much of anything.

Right now I think Obama needs to be careful thinking that the American people gave him a mandate. This was not a big issue for many voters. I think he could do a little more on his end right now to at least let the republicans save face. Instead, he just keeps putting more pressure on them to cave.

The President, once again, could be doing quite a bit more to lead here. Contrary to popular belief Obama is a pretty lousy politician. He could at least throw the Republicans a bone on the Susan Rice thing. He'll, something...anything.

"**** you I won now do what I say" is not a political strategy. Hell, George W wasn't that big of a dick in his second term

[Duckus]

At this point I think the Republicans have made it clear they will budge on taxes if Obama budges on entitlement reform. Doesn't sound like Geitners plan gave up much of anything.

Politico's report today makes it seem like a deal is much closer than it seems, which would be good..

Democrats have put on the table what that want in revenues/taxes - Republicans seem hesitant to layout details on cuts to entitlements. Instead they seem to want Obama to play his cards first.

A top Democratic official said talks have stalled on this question since Obama and congressional leaders had their friendly-looking post-election session at the White House. “Republicans want the president to own the whole offer upfront, on both the entitlement and the revenue side, and that’s not going to happen because the president is not going to negotiate with himself,” the official said. “There’s a standoff, and the staff hasn’t gotten anywhere. Rob Nabors [the White House negotiator], has been saying: ‘This is what we want on revenues on the down payment. What’s you guys’ ask on the entitlement side?’ And they keep looking back at us and saying: ‘We want you to come up with that and pitch us.’ That’s not going to happen.”

http://m.politico.com/iphone/story/1112/84364.html

[twa]

That’s not going to happen.

you are probably right....as zoony is

[Stadium-Armory]

The House Republicans have no shame; It makes them good negotiators.

[Larry]

I think Obama ought to draft a whole package, and make it public.

I think that's called "leadership".

Yeah, I'm certain that the Republicans want to play politics with it.

They want entitlements cut. But they want to be able to say that Obama did it. They want campaign commercials that say "We didn't do that, Obama did."

But then, if Obama's proposal is actually a good one, then that means he gets all the credit for it, too.

If it were me? I'd propose raising the retirement age. That way, I get to take credit for being the guy who saved SS and Medicare. (And watch the Republicans try to campaign against it, because it deprives them of their "SS is bankrupt, therefore we have to get rid of it" card.)

And, I'm also sure, they want Obama to go public with "this is the maximum I'm willing to go", so they can then demand that he go further.

But again, I think it's Obama's job.

Stand behind the Presidential seal, and present a proposal. Make it one that you're willing to own. Send it to Congress, and then let them start "improving" it.

It's in the job requirements.

[nonniey]

I think Obama ought to draft a whole package, and make it public.

I think that's called "leadership".

Yeah, I'm certain that the Republicans want to play politics with it.

They want entitlements cut. But they want to be able to say that Obama did it. They want campaign commercials that say "We didn't do that, Obama did."

But then, if Obama's proposal is actually a good one, then that means he gets all the credit for it, too.

If it were me? I'd propose raising the retirement age. That way, I get to take credit for being the guy who saved SS and Medicare. (And watch the Republicans try to campaign against it, because it deprives them of their "SS is bankrupt, therefore we have to get rid of it" card.)

And, I'm also sure, they want Obama to go public with "this is the maximum I'm willing to go", so they can then demand that he go further.

But again, I think it's Obama's job.

Stand behind the Presidential seal, and present a proposal. Make it one that you're willing to own. Send it to Congress, and then let them start "improving" it.

It's in the job requirements.

You'de raise the retirement age? Then why the heck did you vote for Obama? (OK I know it is just one issue but that one is clearly in the Republican corner).

[SnyderShrugged]

Anyone who thinks that either party establishment has any true desire to control debt and spending is naive at best and dumb at worst

[Larry]

You'de raise the retirement age? Then why the heck did you vote for Obama? (OK I know it is just one issue but that one is clearly in the Republican corner).

Not from where I sit.

From where I sit, the Democrats want to save SS.

The Republicans want to trumpet false claims about it being bankrupt, right now, and use those false claims to demand that the only solution is to get rid of it entirely, and replace it with a system that is tilted in favor of high-income retirees (as opposed to the present system, which favors the low-income) and the financial services industry.

Seems to be the Republican's standard political tactic for the last few decades. Yell real loud about a crisis that they created, and which they are refusing to allow anybody to solve. And then announce that the only solution you will permit for this crisis, is something that you've wanted to do, all along, but didn't have the votes for.