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The fiscal cliff

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Ben Stein said "there is also a too low taxes problem"

Consider this. For the past 4 years, total federal revenue (all sources) as a percentage of GDP has been below 16%. The last time prior to that when total government revenue was below 16% of GDP was 1950. When we balanced the budget under Clinton, it was at about 20%.


Also, I'd like to know where this myth that lowering taxes raises tax revenue comes from. Where is the inflation adjusted data to support this idea? Looking at recent tax cuts (Reagan, Bush) by percentage of GDP, the revenue never recovered to it's pretax cut levels. Clinton's tax increase did increase revenue, and it kept climbing each successive year (as did the economy), until Bush cut taxes.
 
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what part of asking for $2.50 in spending cuts for every $1.00 in new revenue leaves you thinking there is no talk of spending cuts?

I hate that stat. Obama kept using it but it's BS. I normally hate "factchecking" because they usually have a hard left slant but here's something from the liberal Washington Post.

http://www.washingtonpost.com/blogs...d47934e-0d66-11e2-bb5e-492c0d30bff6_blog.html

By Obama’s math, you have nearly $3.8 trillion in spending cuts, compared to $1.5 trillion in tax increases (letting the Bush tax cuts expire for high-income Americans). That’s how he claims $1 of tax increases for every $2.50 of spending cuts.

But virtually no serious budget analyst agreed with this 1:2.5 accounting. Obama’s $4 trillion figure, for instance, includes counting some $1 trillion in cuts reached a year ago in budget negotiations with Congress. So no matter who is the president, the savings are already in the bank.

The Obama campaign notes that the Congressional Budget Office estimated that the president’s budget would reduce the deficit by $3.5 trillion over 10 years against “an alternative fiscal scenario;” otherwise, CBO says the president’s budget increases deficits. The national debt, as a percentage of the gross domestic product, would rise from 73 percent to 76 percent in that period, for instance. The left-leaning Center on Budget and Policy Priorities also pegs the administration’s deficit reduction as $3.8 trillion, but says the ratio of spending cuts to tax increases is 1 to 1.

The government is growing out of control and no one is slamming on the brakes. It's going to get to the point of no return (and may be there already) where we can't save ourselves from an epic economic/financial collapse one way or another (default on debt, currency devaluation, etc). There's simply not enough blood to suck out of the economy and the "rich" to pay for spending like this. I'd argue the point further but unless Obama somehow pulls a 180 and becomes a deficit hawk, you'll see it begin to unfold before your eyes soon enough.
 
I'm all for going over the cliff and readjusting the rates before the end of 2013; however, it should be said that raising rates alone won't solve our spending problem. The hard truth is we can't afford to stop spending at present because we're in a recession. We also can't afford to raise taxes on the middle class (which is what needs to eventually happen) or raise taxes too much on the wealthy because we're taking money out of the economy.

I'm all for letting the Bush tax cuts expire on everyone making $250k+/yr, but we need to make some hard choices and soon and taxing the rich won't do much... We need to lower corporate rates, lower capital gains taxes, reduce some regulatory burdens that are stiffing growth, and increase spending on infrastructure programs that rely on private manufacturing and contractors. This is all deficit spending, but we need to grow our way out of this problem.

On the entitlement end, we need to start looking at privatizing Medicare and Medicaid and combining the two programs into a single system. Medicare is simply unsustainable, and should be turned over to private health insurers who can compete on an open market in an exchange.

I don't mean issuing vouchers to elderly people to shop for their own providers, ala the Ryan plan. In fact, to the individual the program would look no different - similar to Medicare Advantage (Part D) but privatized throughout and with even greater regulation. You wouldn't buy insurance from a company, you would be insured by the government as you are now - however, like banks do with mortgages, your policy would be bundled into a security and sold on an exchange. You the patient would have very little reason to ever know who actually held your insurance policy as the policy is universal among all Medicare recipients. The Netherlands uses this approach and it is known as a multipayer system. It would allow the United States government to offload the vast majority of financial burden in implementing the single-payer Medicare and the ridiculously complex Medicaid system.

I don't mention Social Security because really it is self-sufficient and deficit neutral. I am for privatizing upwards of 50% of the Social Security Trust and using the invested funds towards public works investments designed to reap profit, rather than just having billions of dollars sitting in an account or getting robbed by greedy Congresspersons who don't give a damn.

Point being, we can get out of the mess we're in, but we need to make some hard choices and start thinking outside of the box. Raising taxing won't do shit, and might be counterproductive if the increased revenues aren't used to somehow stimulate the economy (targeted tax cuts, infrastructure programs, capital gains holiday, etc)..
 
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November 28, 2012 12:00 A.M.
All about Taxes
Democrats and the media have ignored the rest of the fiscal-cliff debate.
By Michael Tanner



How many times have we heard that the only thing standing in the way of a grand bargain to reduce our growing national debt is Republican intransigence on taxes? If Republicans would only agree to dump Grover Norquist, Democrats will agree to cut spending and reform entitlements. Then, we can all join hands and sing Kumbaya as we usher in a new era of compromise and fiscal responsibility.

Except that now that Republicans have agreed to raise taxes, er, revenue, as part of an agreement to avoid the looming fiscal cliff, liberals appear to have decided that there really isn’t a need to cut spending after all.

“Suddenly the clear and present danger to the American economy isn’t that we’ll fail to reduce the deficit enough; it is, instead, that we’ll reduce the deficit too much,” warns Paul Krugman. All this worry about debt and deficits is “an entirely contrived crisis,” writes Robert Kuttner in the Huffington Post. After all, as the New York Times explains, “deficits are actually a good thing when the economy is deeply depressed, so deficit reduction should wait until the economy is stronger.” “So,” sums up Robert Reich, “can we please stop obsessing about future budget deficits? They’re distracting our attention from what we should be obsessing about — jobs and growth.”

Congressional Democrats already appear to have successfully taken Social Security reform off the table. This, despite the fact that Social Security faces $22 trillion in unfunded liabilities. Democrats may be willing to trim Medicare, but both Harry Reid and Dick Durbin are opposed to structural changes, such as raising the eligibility age. Of course, anything resembling Paul Ryan’s premium-support plan is beyond even discussing. Democrats are more inclined to rely on the type of reforms contained in the Affordable Care Act. Yet the administration’s own actuaries project that, even if all of the ACA’s reforms work exactly as hoped, Medicare will remain $42 trillion in the red. And that’s the best-case scenario.

Yet the media still seem obsessed with Republicans and taxes: Will they stick to the Taxpayer Protection Pledge or not? Will tax rates go up or will loopholes be closed? How much new revenue will Republicans agree to?

But there is a profound lack of curiosity when it comes to the other half of this supposed bargain. Remember that hypothetical deal of $1 in tax increases to $10 in spending cuts? Republicans are still being asked about it and criticized for rejecting it. But balancing the budget under that formula would require $9 trillion in spending cuts over the next ten years. When was the last time the president or a Democratic congressman was asked whether or not they would agree to such a deal?

For that matter, it’s worth noting that more than half of Democratic congressmen and eleven senators have signed a pledge to oppose any changes to Social Security or Medicare. If pledges are the root of all evil, couldn’t we pause for just a moment in our attempts to run Grover Norquist out of town to work up the tiniest bit of outrage about this one?

In fact, many Democrats actually want to spend more, at least in the short term. The president’s most recent budget calls for $2.6 in increased spending between now and 2022. That’s $1 trillion more than the $1.6 trillion that the president has called for in new taxes. Therefore, the tax hikes would not be used to reduce the deficit, but to finance new spending. And, according to news reports, the president has already floated the idea of still more stimulus spending as part of the fiscal-cliff talks.

That’s not a “balanced approach.” That’s simply old-fashioned tax-and-spend politics.

The time may someday come to parse the exact meaning of the Taxpayer Protection Pledge. But for now, Republicans are simply negotiating with themselves and with the news media. Democrats haven’t even come to the table.
 
I agree with this. But Obama wants to use war spending decrease to get to this number. The government needs to drop entitlement spending, for any tax increases. I don't think there is a sane Republican who would block a tax increase on those over 500k a year, if the democrats agreed to reform SS and Medicare.
 
Obama wants $2.50 in cuts for every $1 in new revenue. He isn't asking for a tax increase in a vacuum. Stein says you can't get make up the gap with cuts alone.

Still think the president wants to do that?

GOP Leaders Pan White House's Budget Plan
By Caitlin Huey-Burns and Erin McPike - November 30, 2012

Democratic and Republican leaders have needled each other this week to make the first move in the staring match over how to avert the looming fiscal cliff. On Thursday, the White House finally jumped, offering a broad, recycled plan for $1.6 trillion in tax increases, additional stimulus spending and a request to permanently raise the government’s debt borrowing limit.

In exchange, the president offered $400 billion in Medicare savings over a decade, similar to his previous proposal. Republicans weren't interested, and struck a discontented tone that echoed across Capitol Hill.

Read More
 
This is pretty much why Obama got elected, why a Republican will never get elected again, and why this country is going to collapse. The majority voted for the guy they thought would give them more, not the guy that would pull them up. :(

Detroit councilwoman to Obama: We voted for you, now bail us out


Posted: Dec 05, 2012 7:00 AM EST Updated: Dec 05, 2012 8:39 AM EST

DETROIT (WJBK) -- The city of Detroit faces a major financial crisis and one member of city council thinks President Barack Obama should step in and help.

City Council member JoAnn Watson said Tuesday the citizens support of Obama in last month's election was enough reason for the president to bailout the struggling the city. (Click the video player to listen)

"Our people in an overwhelming way supported the re-election of this president and there ought to be a quid pro quo and you ought to exercise leadership on that," said Watson. "Of course, not just that, but why not?"

Nearly 75 percent of Wayne County voters pulled the lever for Obama in November.

"After the election of Jimmy Carter, the honorable Coleman Alexander Young, he went to Washington, D.C. and came home with some bacon," said Watson. "That's what you do."

Young served as Detroit's mayor for 20 years and served as vice chairman of the Democratic National Committee from 1977 to 1981.

The White House has expressed no plans to bailout the cash-crunched city that some experts say could run out of money by the end of the year.

The federal government has bailed out cities in the past, however. In 1975, President Gerald Ford extended more than $2 billion in credit to New York City to help it avoid a financial collapse.




Whoever said this quote was onto something...

"A democracy is always temporary in nature; it simply cannot exist as a permanent form of government. A democracy will continue to exist up until the time that voters discover that they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy, which is always followed by a dictatorship."
 
http://news.yahoo.com/analysis-obama-could-risk-going-over-cliff-081447326--finance.html
Analysis: Obama could risk going over 'cliff'
By JULIE PACE | Associated Press – 3 hrs ago

WASHINGTON (AP) — It may be just a bluff or a bargaining ploy, but the White House is signaling that President Barack Obama is willing to let the country go over the "fiscal cliff," a hard-line negotiating strategy aimed at winning concessions from Republicans on taxes.

If Washington really does fail to avert the looming series of tax hikes and spending cuts, the White House will portray Republicans as the culprits for insisting on protecting tax cuts for the wealthy, an effort the administration is laying the groundwork for now.

"This is a choice of the Republican Party," said Dan Pfeiffer, White House communications director. "If they are willing to do higher rates on the wealthy, there's a lot we can talk about. And if they are not, then they'll push us over the cliff."

But going over the cliff also would be full of risk for a president fresh off re-election and facing at least two more years of divided government.

Ending the year without a deal could roil financial markets and dent consumer confidence just as the economy is strengthening. It could make it harder for Obama to get Republican help on his second-term priorities like overhauling the immigration system and the nation's tax code, or in getting potential Cabinet replacements confirmed.

And it would signal to the country that the president's campaign prediction that the GOP "fever" would break following his re-election was a pipe dream.

House Speaker John Boehner says Obama is playing a risky game. "If the president really wants to avoid sending the economy over the fiscal cliff, he has done nothing to demonstrate it," the speaker said.

White House advisers say the president wants to avoid going into next year without a tax and spending deal, a scenario they say would hurt the economy. But with few signs of progress in postelection negotiations with Republicans, administration officials are hardening their warning that Obama will take that risk if the GOP refuses to drop its opposition to raising tax rates on families making more than $250,000 a year.

Of course, the White House warning could be a bluff, offered in the belief that Republicans are unlikely to back down on taxes unless they believe Obama is willing to go over the cliff.

The White House says Obama's firm stand on tax rate increases for the wealthiest 2 percent of Americans is driven by economics. The debt-saddled country can't afford to continue with the George W. Bush-era tax cuts, the president and his advisers argue.

Obama has made that case to Republicans before only to back down in the final stages of negotiations. But this time around, the president and his team believe they hold the political leverage.

There is some evidence to bolster that notion. Taxes were a centerpiece of the presidential campaign, with Obama running on a pledge to end the Bush tax cuts for the wealthiest Americans and return their rates to where they were in the 1990s, when the economy was thriving.

Exit polls showed that 60 percent of voters supported that position, an even higher percentage than backed Obama's re-election.

A new poll also suggests a majority of Americans would blame Republicans if the government goes over the fiscal cliff. Just 27 percent of those surveyed said they would blame Obama, compared with 53 percent who said they would point the finger at the GOP, according to the Washington Post-Pew Research Center Poll.

Seeking to cement those impressions, the White House is casting Republicans as willing to forgo tax cuts for the middle class in order to protect lower rates for wealthier Americans. Rates for all income earners will go up at the end of the year if both sides can't reach a deal.

In turn, Republicans say Obama is acting like a stubborn partisan who will put the economy in peril in order to get his way.

"My sense is the White House wants to go over the cliff," said Tony Fratto, a former Treasury and White House official under President George W. Bush. "That may be the only way they get rates they want."

Going over the cliff could mark a new low in the relationship between the president and congressional Republicans. While the contentious debates earlier in Obama's first term over funding the government and raising the nation's borrowing limit went right up to the edge, both sides were always able to reach a deal.

As Obama ran for re-election, he sought to assure voters weary of Washington's bickering that things would be better if he won a second term.

Speaking to supporters in June, he said, "I believe that if we're successful in this election — when we're successful in this election — that the fever may break."

"My hope, my expectation, is that after the election, now that it turns out that the goal of beating Obama doesn't make much sense because I'm not running again, that we can start getting some cooperation again," he added optimistically.
 
Higher tax rates won't support entitlement state

December 4, 2012 | 8:00 pm | Modified: December 4, 2012 at 3:45 pm

The fiscal cliff negotiations seem to be foundering on Barack Obama's insistence on higher tax rates on high earners and House Republican leaders' insistence on opposing them. The president believes he has a mandate from voters for his position, and House Republicans believe they have a mandate from voters for theirs.

The real argument here is over the size and scope of government. Under Barack Obama, federal outlays -- the technical term for federal spending -- have increased to 24 and 25 percent of gross domestic product.

That's a higher level of federal spending than in any year since 1946, when we were demobilizing after World War II. And the Obama budgets envision federal spending to continue at such levels more or less indefinitely.

This is an inevitable result, some Obama backers argue, of our aging population. Spending for entitlement programs for the elderly -- Social Security and Medicare -- are on a rising trajectory, and so the federal government simply must absorb a higher percentage of the economy than in the last two-thirds of a century.

Let's adjust the trajectory, House Republicans argue, by reforming the entitlements. Obama has given lip service to this idea -- but has offered no specifics.

He seems to be paying attention to those Democrats who oppose any changes in entitlements. Just raise taxes, they seem to say, and entitlements can keep rising as scheduled.

The problem is that, as historian Paul Rahe wrote earlier this year, "We no longer have the resources to support the entitlement state. We can certainly raise taxes, as President Obama and the Democrats intend to do, but that does not mean that in the long run we will take in more revenue -- and it is massively increased revenue that the entitlement state needs."

Rahe seems to have history on his side. To see why, take a look at the Economic Report of the President 2012, Appendix B, Table B-79, on page 412, which shows federal receipts -- the technical term for revenues -- and outlays as a percentage of gross domestic product for every year from 1939 to 2011, with estimates for 2012 and 2013.

Over that period of nearly three-quarters of a century, federal receipts have never exceeded 20.9 percent of gross domestic product. That was the number for the war year 1944.

The highest number since was the 20.6 percent of GDP in 2000, the climax of the dotcom boom. In the Obama years, federal receipts have hovered at 15 percent of GDP.

That's just because tax rates are too low, Obama backers reply. Just raise the rates on high earners and the problem will be solved.

Actually, high earners don't make enough money to close the current budget deficit. You'd need to raise taxes on middle-income earners too.

But we have had higher income tax rates in most of the years since World War II. What history and Table B-79 show is that even much higher rates -- like the 91 percent marginal rate on top earners imposed from the 1940s to the 1960s -- have never produced federal receipts higher than 20 percent of GDP.

Why is that? As the late Jack Kemp liked to say, when you tax something, you get less of it. When the government took 91 percent of what the law defined as adjusted gross income over a certain amount, not many people had adjusted gross income over that amount.

According to a Congressional Research Service study, the effective income tax rate on the top 0.01 percent of earners in the days of nominal 91 percent tax rates was only 45 percent. Others have pegged it at 31 percent.

In the 1970s, when the top rate on wage and salary income was 50 percent and 70 percent on investment income, high earners spent much of their time and energy seeking tax shelters. The animal spirits of capitalists, to use John Maynard Keynes' term, were directed less at productive investment and more at tax avoidance.

But don't European nations extract more in taxes from their citizens? Yes, but through consumption taxes like the value-added tax. But those taxes tend to be regressive, and in this country, sales taxes have been the province of states and localities.

Barack Obama and the Democrats may well get higher tax rates. But it's not likely that high tax rates can ever generate enough revenue to fund unreformed entitlement programs.

Michael Barone, The Examiner's senior political analyst, can be contacted at mbarone@washingtonexaminer.com. His column appears Wednesday and Sunday, and his stories and blog posts appear on washingtonexaminer.com.
 
Online sales tax to be added to defense authorization bill

This may be the last Christmas of online shopping without paying sales tax.

A proposed online sales tax has been offered as an amendment to the National Defense Authorization Act, much to the ire of opponents.

The Computer and Communications Industry Association, a group that opposes this move, says that an online sales tax will burden small businesses, “some of the most promising candidates for future economic growth.”


Read more: http://dailycaller.com/2012/12/04/o...-to-defense-authorization-bill/#ixzz2EFACXLYX
 
Neither side is even serious about this. We will not see any real proposals before the last second. Lets look at facts, the fiscal cliff is an issue as congresses failed to work together to pass reforms. Instead they put it off. Both side are willing to go over the cliff, as they think it would give them more bargening power. The cliff hurts both sides, taxes on everyone and spending cuts. What's makes me sick is the fact the media has done nothing to show Obamas plan is a joke. I talk to people at work all the time who think taxing the rich is the magic cure. I have had people say, once Obama taxes the rich, we will have a surplus and he can lower taxes for everyone else. I asked him, why do you think that, his response was, if Obama's plan did not work, we would know about it. I just left in disbelief. It amazes me how naive and out of touch people are. I agree, raising taxes is not the answer, but I support raising them on the rich, those over 500k a year if it gives us spending cuts. The issue we have is a spending issue, not a revenue issue. People use the example what would you do if this was your family. The first thing you would do is balance your budget, and use any raise to pay down debt. Not use the raise to take on more.
 
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So the fiscal cliff is just 11 days away and congress is as dysfunctional as ever.

Bonner's Plan "B" didn't even come up for a vote because he didn't have enough support in his own party to pass it.

Polling has consistently shown most Americans back the president, who insists wealthy Americans must pay more, rather than Boehner and his Republican colleagues, who have balked at tax rate hikes and demanded spending cuts and entitlement program reforms.

A new CNN/ORC International survey released Thursday showed that just over half of respondents believe Republicans should give up more in any solution and consider the party's policies too extreme.

The two sides seemingly had made progress on forging a $2 trillion deficit reduction deal that included new revenue sought by Obama and spending cuts and entitlement changes desired by Boehner.

Senior administration officials said Obama and Boehner have not spoken since Monday, when the president made a counterproposal to a Republican offer over the weekend.

The president's offer set $400,000 as the household income threshold for a tax rate increase
. It also included a new formula for the consumer price index applied to benefits for programs such as Social Security, Medicare and Medicaid to protect against inflation, much to the chagrin of some liberals.

The new calculation, called chained CPI, includes assumptions on consumer habits in response to rising prices, such as seeking cheaper alternatives, and would result in smaller benefit increases in future years. Statistics supplied by opponents say the change would mean Social Security recipients would get $6,000 less in benefits over the first 15 years of chained CPI.

Boehner essentially halted negotiations by introducing his Plan B on Tuesday. He described it as a fallback option to prevent a sweeping tax increase when tax cuts dating to President George W. Bush's administration expire in two weeks. The spending cut vote -- similar to one passed by the House last year that went nowhere in the Senate -- was added to the docket later Thursday, to appeal to conservative legislators upset about backing a tax increase without acting on spending and protecting the military budget.

The House speaker's reasoning was that the passage of Plan B and the spending bill would put the onus on Obama and Senate Democrats to accept them or offer a compromise.

http://www.cnn.com/2012/12/20/politics/fiscal-cliff/index.html?hpt=hp_t1

The president gave concessions, Boehner responded by wasting a whole week, and now instead of working to get something done

And after Thursday's session, Cantor's office said legislative business was finished for the week but the House could reconvene after Christmas if needed.

If needed? Wouldn't want to inconvenience them by asking them to do their jobs.
 
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We will likely go over the cliff. The Senate, Constitutionally, cannot take first action on a tax measure and Speaker Boehner simply has no control or leverage over his lame caucus, lame duck or not. I cannot say that Obama did not compromise, because he gave into the GOP's primary demand of offering up meaningful cuts to either Social Security or Medicare (both proposals I am opposed to, vehemently).

There may be enough votes in the House to pass a $500k+ tax increase. If put to a vote, there should be enough Republicans to join the vast majority of Democrats that would vote for such a measure. But in order to get Democratic approval, they would need to consider only the tax increase and not the reduction in Social Security Benefits (via retabulation using chained CPI).

Personally, I think the cleanest approach is for Obama to address the nation and say explain that Treasury department will not adjust the withholding tables going into 2013 until Congress determines the future rate. He should guarantee that the middle class will not see a tax increase, and that 95% of Americans will have the same tax rate.

I don't think that's what's best for the country, though. I just think it's what he should do presently.
 
We will likely go over the cliff. The Senate, Constitutionally, cannot take first action on a tax measure and Speaker Boehner simply has no control or leverage over his lame caucus, lame duck or not. I cannot say that Obama did not compromise, because he gave into the GOP's primary demand of offering up meaningful cuts to either Social Security or Medicare (both proposals I am opposed to, vehemently).

There may be enough votes in the House to pass a $500k+ tax increase. If put to a vote, there should be enough Republicans to join the vast majority of Democrats that would vote for such a measure. But in order to get Democratic approval, they would need to consider only the tax increase and not the reduction in Social Security Benefits (via retabulation using chained CPI).

Personally, I think the cleanest approach is for Obama to address the nation and say explain that Treasury department will not adjust the withholding tables going into 2013 until Congress determines the future rate. He should guarantee that the middle class will not see a tax increase, and that 95% of Americans will have the same tax rate.

I don't think that's what's best for the country, though. I just think it's what he should do presently.

They should vote on the entire package. They will lose some democrats, but I think enough people from both sides would see it as the best compromise they are going to get to pass it. You lose republican votes without the CPI change being part of it. Compromise means both sides voting for something they don't want to get something they do want.
 
None of these guys know what they want to do. All their accounts should be frozen until they come up with a compromise.
 

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