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Old 11-10-2012, 01:20 PM   #1
SamIam
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OMG! It's the Fiscal Cliff!

In case you've been wondering, this story in Forbes gives a pretty good explanation of what the fiscal cliff is all about:

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It begins with the December 31, 2012 expiration of the Bush tax cuts. These were originally scheduled to expire at the end of 2010 but were extended two years ago in a horse trade between President Obama and the GOP controlled Congress. You may recall the December deal, following on the heals of the Republican wave election victory of 2010, wherein President Obama agreed to continue the tax cuts for all Americans in exchange for Congress agreeing to extend long-term unemployment benefits for the many Americans who were out of work.

Should the Bush tax cuts now be permitted to expire, taxes will go up for most Americans—an increase that would extend to the taxes we pay on our earnings, investments and inheritance along with the removal of a number of tax incentives that have been made available to businesses for things such as research and development.

But the expiration of the Bush tax cuts is just the beginning.
The temporary, two percent reduction in payroll taxes that the Obama administration pushed through so that consumers could have a few more dollars to spend is also scheduled to end on December 31 of this year along with the long term unemployment benefit extension mentioned above.

Adding to the misery is the reality that, beginning on January 1, some 26 million households will again become subject to the alternative minimum tax which is estimated to raise taxes for many Americans by as much as $3,700.

When it is all said and done, the expectation is that the average American household will be paying $2,000 to $3,000 more in taxes each year—leaving them with $2,000 to $3,000 less to spend in our consumer driven economy.

Not a good thing as we struggle to get the economy on a more solid footing. But we’ve only just gotten started.

While the expiration of all these laws that have provided Americans a measure of tax relief dating back to 2001 will deliver the ‘set up’ punch, the ‘closer’ comes from the sudden and immediate reduction in government spending that hits on January 1—courtesy of the failure of the While House and the Congressional GOP to reach a more reasonable agreement in 2011 to resolve the debt ceiling crisis.
This is the ‘sequester’ you’ve heard so much about.

The cuts hit all areas of the federal budget, including a $55 billion reduction to the Pentagon’s budget in 2013, a reduction of payments to physicians participating in Medicare, substantial cuts to FEMA and the Dept. of Education budget along with a host of serious reductions across the wide ranging operations of the federal government. - more
There is some speculation that each side may play a game of “chicken” with the other. The lame duck Congress (to continue with bird analogies) will do a lot of posturing and blustering along the standard party lines then go home without resolving anything. Happy New Year, everybody.

The major sticking point seems to be the extension of the Bush tax cuts for those with incomes over $250,000. Republicans become hysterical at the very thought of this and the Republican propaganda machine is already working over time. If those in the $250,000 plus tax bracket have to pay higher taxes, this will adversely impact “small businesses” and the “job creators.” These people will take their toys and go home and pout if forced to pay the same amount in taxes as they did in the Clinton era. No jobs for YOU, America! Take that!

But wait? Small business? “Job creators”? George Orwell would have been proud. By the Republican definition, Mitt Romney is a “small businessman.” As a matter of fact, so is Barack Obama. Say what? And what’s all this about "job creation"?

Again I turned to Forbes, hardly a bastion of liberal progressivism, and read their well-researched historical analysis of tax cuts and jobs creation. Jobs growth under the George W. Bush administration with its tax cuts averaged from 4.5% to 7%. Sounds good? Well, not really. Since 1950, with the exception of the Eisenhower administration, EVERY president who served two terms saw job growth during his tenure. And it was DOUBLE DIGIT job growth, not the anemic numbers W. managed to achieve with his tax cuts for the wealthy.

What we have here are a bunch of tea party inspired lemmings who will rush us over that “fiscal cliff” as a matter of political ideology, NOT what is good for the Country.
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Old 11-10-2012, 02:14 PM   #2
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I'm with Lawrence O'Donnell on this one. It's not a cliff - it's a curb. If we step off, it'll be to the democrats' advantage - and then we can strike a deal that favors the left, and retroactively apply it back to the first of the year. Bam. Problem solved. Make the defense cuts, fix the other spending cuts, retroactively fix the taxes for the poor and middle-class but don't fix them for $250k+. Twist republican arms and we can make this work.
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Old 11-10-2012, 02:23 PM   #3
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Here is another article explaining who will get hit and the possible effects on the economy:

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But before we get to the policy -- and the graphs -- let's talk about the term. "Cliff" is an imperfect analogy. It's really more a long, rolling hill. A fiscal slope.

....

You pay more. That's the three word summary of the fiscal cliff's impact on your taxes. If your household makes a typical salary -- say, $50,000 -- you should expect to pay $2,000 more in taxes next year. If your household makes an atypical salary -- say, $500,000 -- you should expect to take a $50,000 hit. The richer you are, the bigger the hit you face as a share of income. The top 0.1% would see an average tax hike of $600,000.

....

The double whammy of spending cuts and tax changes will push the U.S. economy into a recession in the first six months of 2013, according to the Congressional Budget Office. Unemployment would rise to 9%. Real GDP would decline by about 3% in the first half of 2013. That's a certain double-dip.

...

Nobody wants a recession. But you know what's worse than a short-term recession? A bad long-term deal. That's why some liberals are asking the president to dig in and not make a compromise with Republicans that would change Social Security and Medicare, or give up on higher tax rates on the richest 2%.

The CBO has projected that making a deal to avoid the fiscal cliff entirely would improve GDP growth by an astounding 2.9% by the fourth quarter of next year (see left). To put that in perspective, we're expected to grow by 1.5% in the fourth quarter of this year. About two-thirds of this growth would come from keeping taxes down. The rest would come from keeping spending up.
http://www.theatlantic.com/business/...atters/264990/


I'm support Obama right now with this. Extend the tax cuts for people who are more likely to spend the money (under $250,000) and make appropriate spending cuts. Nothing too extreme, I really don't want another recession, but enough to get momentum going on budget issues.
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Old 11-10-2012, 07:37 PM   #4
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I've always wondered what sort of buying spree the $250,000 plus gang are supposed to go on. Since the US doesn't make anything anymore, the wealthy are not going to help things by buying expensive trinkets from their homeland. I think they buy their expensive trinkets from foreign countries, anyway. Art? Maybe they'd buy a bunch of stuff created by American artists, and the money from the art community would trickle down to the rest of us. Nah, I bet the uber rich consider it gauche to have a bunch of American art cluttering up the mansion.

I know! Learjets! Who couldn't always use another Learjet? Are those made in the US? OK, never mind. I just checked and the Canadians took over making the Learjet. Well, I'm sure the wealthy will do SOMETHING to help the US economy out, right? Especially if we all have to go over some financial cliff on their behalf.
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Old 11-11-2012, 05:36 PM   #5
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The rich throw a lot of parties. So they do pump money into the catering and rented entertainment industries. Also, they consume a fair amount of domestic wine mixed in with their foreign wine. So hey, that's practically like paying the migrant grape-pickers directly!
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Old 11-11-2012, 07:35 PM   #6
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Originally Posted by SamIam View Post
Art? Maybe they'd buy a bunch of stuff created by American artists, and the money from the art community would trickle down to the rest of us. Nah, I bet the uber rich consider it gauche to have a bunch of American art cluttering up the mansion.
Uh huh, especially art purchased directly from artists. If the uber-rich deign to buy art made by living American artists, it is most likely through dealers and galleries (also very wealthy people) that take a 50% commission. None of those big-money art auction sales we see on the news benefit any artists.
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Old 11-11-2012, 08:04 PM   #7
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BayPop Mag

Here is what the rich in my area splurges on...

Note the cufflinks on page 100 for $40k and the cell phone on page 107 for $179k. I would think you could blow a hell of a lot of money very easily.

Yeah, I know someone featured in this magazine, which is what brought it to my attention.
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Old 11-11-2012, 08:18 PM   #8
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1) we know jobs were created and the economy boomed when taxes made sense. To create a recession, George Jr, et al created welfare for the rich. Selling that lie as a job creator. We know that welfare contributed to a massive recession. Why then continue what has a long history of creating recessions? Instead, restore taxes to levels that once made a booming American economy in the 1990s.

2) economics is now taking revenge. No money game that can avert that economic revenge. Remaining question: who will pay the most for the fiscal mismanagement in the 2000s? Those bills must be paid no matter what money game is played.

And so 3). Economists discuss two fundamental parameters that best define the resulting damage and recovery. The first is a Gini index. A relationship between the wealthiest and everyone else. Historically, when a Gini index falls, then a gap between the wealthiest and all others decreased. Then an economy booms. When the Gini index increases, then recessions tend to happen. Of course we are discussing short term economics - maybe a result in five or ten years. In the 2000s, America's Gini index has increased.

Second, is a variable called a "multiplier". A multiplier of 1.5 means that $1 in government spending cuts reduces the nation's GDP by $1.50. So does austerity create a multiplier greater than or less than 1? What is the economic harm in the next few years and much longer in the short term? Well, that multiplier varies between 0.9 and 1.7 when austerity is implemented during a recession. And that multiplier tends to be below 1 (better return on government dollars) when austerity is implemented during a booming economy - ie during Clinton's tenure.

These figures only summarize minor variations found in the money games. Because economics must still take revenge. We are discussing pain immediately or less pain over more years. Politicians have been preaching wild speculation without numbers. Also forget to mention that austerity today means different consequence in year one and in year eight. Moreso, the depth or a recession represent a shortage of innovation. Something that economists ignore because it cannot be quantified by economists.

Recessions are only solved by the resulting innovations in the economy. All towns suffer from a recession. Which ones in a nation, historically, recover from a recession faster and stronger? Those with innovative industries. Despite all that silly argument over austerity verses stimulus (or tax cuts), we know the only poeple who best solve a recession and debt crisis are the industries (and people) who innovate.

They tend to be people who are not rich (instead aspire to be rich). And tend to be stifled by rich who stifle innovation and harm economies to protect their wealth. None of that is discussed when the people are being fed sound bytes by extremist liberal and conservative politicians.

The fiscal cliff is about who gets punished most for George Jr's money games (and other fiascos including Mission Accomplished). Those who most deserve to be punished are those who got rich by playing money games. By not building productive industries.

How do we implement that solution? Good luck trying to punish those most responsible for this recession. Instead the economy must punish all workers. The people who did not get rich. No money game that can target the problem - ie MBAs. But we can try to reward those who create innovative products. That means nine totally defective and bankrupt investments only resulting in one product company.

Instead, we have politicians who said they want America to fail. Or who claim tax cuts create jobs (when history proves otherwise). So we have the fiscal cliff - that punishes the less guilty more and less punishes those who created this recession.

Anybody see Nardelli, Wagoner, Frazier, Perez, Cantor, etc complaining about pain from a recession they intentionally created? When we talk about the fiscal cliff, why are they not put forth as icons to this problem? Others who hype poltiical spin also do not discuss relevent numbers. Including a multiplier or a Gini Index. Liars and their deceieved victims routinely discuss solutions by ignoring such numbers. Note how many are outrightly lying (just like Rush Limbaugh). Note those with miracle solution never once discuss innovation or its sources. Instead they hype getting rich (the MBA solution) - as if money games solve problems or create innovation.
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Old 11-11-2012, 09:48 PM   #9
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Well, y'all brought it on yourselves, Mitt would have fixed everything by now.
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Old 11-12-2012, 02:46 AM   #10
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Well, y'all brought it on yourselves, Mitt would have fixed everything by now.
Well, if they hadn't screwed up the primaries we'd have been enjoying some of Newt's $2.50/gal gas by now!
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Old 11-12-2012, 12:12 PM   #11
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Well, if they hadn't screwed up the primaries we'd have been enjoying some of Newt's $2.50/gal gas by now!
Or at the very least, I'd have one of Mitt's 12 million new jobs.

Over the weekend I heard House Speaker John Boehner mention in passing that the tax cuts for the wealthy were important to help create a smaller government. At last, a politician speaking the truth if only accidently in passing. Dry up the funding in order to starve the beast.

Republicans have always wanted "small government." That means not only fewer taxes, but among other things, less government oversight in the form of regulatory agencies. I'm no big fan of government snooping, but on the other hand, lack of any sort of real outside regulation helped allow the boys on Wall Street to play fast and lose with the mortgage lending industry and other financial instruments for their own gain and to the nation's continuing sorrow.

It's like a teenager wanting his parents to trust him to be home alone next weekend when the last time they left him in the house by himself for a few days, he threw the biggest party evah for him and his friends. Kids were passed out on the front lawn, the furniture was destroyed, the police were called, and a good time was had by all. Except Mom and Dad who had to clean up the mess and bail Junior out of jail. Like Junior's Mom and Dad, I view Republican demands for "less government" with a jaundiced eye.
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Old 11-12-2012, 03:38 PM   #12
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I think we've all been looking at this the wrong way. We've been looking at the financial meltdown and worldwide recession as a failure...but the very wealthy have increased their wealth. Maybe to them it doesn't seem like a failure.
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Old 11-12-2012, 04:15 PM   #13
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I know that, for me, as an employed single childless white male with no mortgage who lives in an area whose housing prices never crashed, and who started investing* after the crash, it's been great!

I can only imagine what it's like for someone truly wealthy.

*not counting 401K
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Old 11-12-2012, 04:37 PM   #14
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I know that, for me, as an employed single childless white male with no mortgage who lives in an area whose housing prices never crashed, and who started investing* after the crash, it's been great!

I can only imagine what it's like for someone truly wealthy.

*not counting 401K
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Old 11-12-2012, 05:59 PM   #15
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I think we've all been looking at this the wrong way. We've been looking at the financial meltdown and worldwide recession as a failure...but the very wealthy have increased their wealth. Maybe to them it doesn't seem like a failure.
I would imagine that the very wealthy consider it a resounding victory. According to the Center for Tax Justice, the super rich have at least $21 trillion stashed away in offshore holdings around the world. They're doing quite well, thank you very much, and they don't need any official types poking around in their affairs. Did you know that the 6 members of the Walten Family (of WalMart fame) have as much wealth as 30% of the US population?

Abd I doubt very much if people like that are so much worried about higher taxes as they are by the thought of supporting a govenment which includes watch dog agencies with those taxes. I bet when the super rich hear that quote of President Kennedy's,"Ask not what your country can do for you, but rather ask what you can do for your country," they bend over with laughter.

What's a country good for if you can't use it to further your own ends without caring what this may do to everyone else?
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