The Pending "Fiscal Cliff" (1 Viewer)

[Steve R.]

The election is over, Obama has won. Now the politicians are moving towards acting of the fiscal decisions that were kicked-down-the-road. The Washington Post, in recognition, had this article: "Both sides appear upbeat on opening round of ‘fiscal cliff’ talks". Since things are just "warming-up", not much can be said at this time. Nevertheless, in observing this story unfold over the past couple of years there some things for each of us to ponder on.

• Obama's "tax the rich" won't solve the deficit spending issue. The reality is that everybody's taxes will need to be increased along with spending reductions. What the US needs is a fiscal plan that goes beyond the populist simplistic misleading "tax the rich" mantra. It is time for the politicians to make the "tough" decisions.

• Every once in a while, tax reform pops-up. Will the politicians mean it this time? I hope so. In the past, tax reform seems to have been blithely tossed-out as a populist sound byte that is immediately forgotten after the votes have been counted. Realistically, tax reform will have to wait well into 2013.

• Suppose that Obama gets to "tax the rich". Will the additional revenue be used to reduce deficit spending OR will that additional revenue be used to increase spending in certain programs? Obama vaguely implies deficit reduction, but then we will have to wait to see if he really means what he says.

• Savings after 2016 should be dismissed as hiding the intent of any supposed deficit/debt reduction plan. Obama will be out-of-office and any incoming administration will feel no obligation to continue with an "obsolete" fiscal plan. Consequently, any deficit/debt reduction plan that is agreed to must deal with the time period 2013-2016.

The era of yearly trillion dollar deficits needs to come to an end. Fiscal responsibility needs to be restored.

 

[georgedwilkinson]

This can be done. President Clinton and a Republican Congress did it in the 90s. Question is, will we have leaders leading or... ???

 

[DaneS]

We don't have leaders leading, we have zombies following.

 

[Adam Caramon]

President Obama and the Democrats ran on "tax the rich". President Obama and the Democrats won.

Yet, the Republicans still state they are not open to tax increases.

We'll have to see what transpires, but if Republicans refuse the "tax the rich" plan that is running at 68% approval or such, they will be the ones thwarting the will of the people.

 

[Steve R.]

President Obama and the Democrats ran on "tax the rich". President Obama and the Democrats won.

Not so fast. We did not elect a dictator who has the sole authority to impose his will on the American people. So are you implying that Obama can ignore the voice of 48% of the electorate??? Seems a bit reminiscent of Romney's misconstrued 47% remark.

The popular vote was 50.6% for Obama, 47.8% for Romney. We also have three elected branches of government. The Republicans by popular vote of the electorate still retain control of the House.

Our Republic is designed so that all three branches are involved in the decision making process. That means compromise. Now Obama was elected as this Nations "fearless leader" and he asserts to be above partisan politics. That means reaching out to the opposition to get things done.

... if Republicans refuse the "tax the rich" plan that is running at 68% approval or such, they will be the ones thwarting the will of the people.

No, tax hikes may be in order but you can't unilaterally declare that the Republicans would be: "thwarting the will of the people". The onus does not solely belong to the Republicans. Achieving a solution means compromise, both sides have to give-up one or more of their sacred cows. In the spirit of compromise, what do you suggest that the Democrats give-up?

I would suggest real spending cuts with a promise that the revenues derived from increased taxation also be applied to deficit reduction. The goal, a balanced budget with enough revenue left over to make real payments towards reducing the debt. If the Democrats are not willing to negotiate, they are "thwarting the will of the people".

Washington Post Election Results

 

[Steve R.]

We don't have leaders leading, we have zombies following.

Welcome to the forum. Great line.

 

[Steve R.]

Since posting, I ran across several recent stories that may not seem to be directly related to the "fiscal cliff" extravaganza. But they are in the sense that the taxpayers may be left to pick-up the pieces. If that is the case, any proposed "fiscal cliff" budget, will need to raise even more revenue through increased taxation.

One also has to wonder if these stories were prominent front-page headlines if that would have had an effect on the Presidential election.

Moreover, the "fiscal cliff" was a monster that metastasized out of government paralysis. A bad economy of course can cause losses, but one also has to wonder why these pseudo-governmental agencies are in dire financial straits? Hypothesis: Bad management that refused to acknowledge the need to make rationale financial decisions like Congress and he President?

Pension Benefit Guaranty Corp. running $34 billion deficit

The federal agency that insures pensions for 43 million Americans saw its deficit swell to $34 billion in the past year, the largest in its 38-year history.

FHA running out of money

An annual audit set for release Friday projects that the federal agency that insures millions of home loans across the country could face losses of $16.3 billion, a figure that far exceeds earlier estimates and one that raises the specter that the Federal Housing Administration could need taxpayer aid for the first time in its 78-year existence.

Postal Service posts record $15.9 billion deficit

The struggling U.S. Postal Service on Thursday reported an annual loss of a record $15.9 billion and forecast more red ink in 2013, capping a tumultuous year in which it was forced to default on billions in payments to avert bankruptcy.

Fannie Mae Requests $7.8B From Taxpayers to Cover Q3 Deficit

The nation’s largest mortgage company says it lost $5.1 billion during the third quarter of this year.

 

[Adam Caramon]

Not so fast. We did not elect a dictator who has the sole authority to impose his will on the American people. So are you implying that Obama can ignore the voice of 48% of the electorate???

No. Blowing everything out of proportion seems to be popular these days.

I said that President Obama and Democrats ran on the idea of raising taxes on the wealthy. The people voted in the election. Democrats retained the White House, picked up seats in the Senate, and added seats in the House of Representatives.

Clearly the majority of voters agree with this idea. Even among Republicans, nearly 40% agree with raising taxes on the wealthy.

The popular vote was 50.6% for Obama, 47.8% for Romney. We also have three elected branches of government. The Republicans by popular vote of the electorate still retain control of the House.

By popular vote?

http://en.wikipedia.org/wiki/United_States_House_of_Representatives_elections,_2012
House Democrats won a narrow plurality of the nation-wide vote,[8][4] and according to an analysis by the nonpartisan organization FairVote, about 52% of voters preferred Democratic candidates,[9] but House Republicans were able to retain a solid majority due to their advantage in the congressional redistricting process following the 2010 United States Census, and because of population distribution and many Democratic votes concentrated into urban and minority districts. The last time the majority party in the House was unable to receive a plurality of the popular vote was in 1996, where the GOP kept the House for similar reasons.[10][11]

i.e., Republican gerrymandering.

Our Republic is designed so that all three branches are involved in the decision making process. That means compromise. Now Obama was elected as this Nations "fearless leader" and he asserts to be above partisan politics. That means reaching out to the opposition to get things done.

Certainly, compromise is the goal. I wonder if Republicans will continue with their historic use of the filibuster?

The White House says raise taxes on the wealthy, the Senate says raise taxes on the wealthy, the majority of American citizens say raise taxes on the wealthy, and the House of Representative says no higher taxes on the wealthy. How do you define compromise in this situation?

No, tax hikes may be in order but you can't unilaterally declare that the Republicans would be: "thwarting the will of the people". The onus does not solely belong to the Republicans. Achieving a solution means compromise, both sides have to give-up one or more of their sacred cows. In the spirit of compromise, what do you suggest that the Democrats give-up?

If the majority of the American people want taxes increased on the wealthy, and Republicans refuse to do so, what else could it be other than thwarting the will of the people?

Republicans have always preached that every bill should pass or fail on its own merit. So, let's put forth the middle class tax cut extension on its own, and see if Republicans are willing to pass it.

As far as what Democrats should compromise on, the president has already signaled his willingness to work on so called "entitlement" reform. However, during the primaries, Republican candidates were asked if they would accept a 10 dollar spending cut to 1 dollar tax increase plan, and they all said no.

Faced with this, what should Democrats have to offer to Republicans? Again, who really isn't compromising?

I would suggest real spending cuts with a promise that the revenues derived from increased taxation also be applied to deficit reduction. The goal, a balanced budget with enough revenue left over to make real payments towards reducing the debt. If the Democrats are not willing to negotiate, they are "thwarting the will of the people".

Democrats are willing, have been willing, and have tried to negotiate with Republicans. The Republican leadership decided earlier on in 2008 to be against anything President Obama was for. Their #1 stated goal was to make President Obama a 1 term president. They failed. Will they now be willing to work with him? Time will tell, but I'm very doubtful.

 

[Steve R.]

Adam: We can each write a book reviewing our respective positions, but then we enter the realm of repeating ourselves. So, for now, I'll leave it at: "I respectfully disagree".

 

[georgedwilkinson]

Just curious: anybody actually done the math on taxing the rich? If you took every dollar away from the rich and put it into the treasury, leaving the rich penniless and unable to pay taxes (or eat), what would that do to the "fiscal cliff?"

I've seen where somebody had presumed to do that but there were too many unanswered questions about the process.

It would be cool if we had something in the US to accurately tell us if the proposed actions of Congress would have the intended results. Maybe some kind of budget office or other.

 

[Steve R.]

Just curious: anybody actually done the math on taxing the rich? If you took every dollar away from the rich and put it into the treasury, leaving the rich penniless and unable to pay taxes (or eat), what would that do to the "fiscal cliff?"

I share this concern. My casual internet searches did not disclose anything definitive, merely an overall consensus that taxing the rich would not really contribute anything substantial to reducing deficit spending. Of course it remains possible that someone has developed some real numbers. If these numbers are available, I would like to see them too.

This following article was posted as I was writing this response. Fiscal Cliff 2013: Why the Obama Tax Plan Will Not Solve the Debt I am not familiar with this website.

The president’s strategy to focus so extensively on tax increases for the affluent to rectify the debt crisis is not a fair and balanced approach for his next four years. ... Every American should contribute something to reduce the deficit and/or to improve the country.

Forbes ran this story on October 29, 2012. What Is Obama's Tax Plan?. Though the article contains some specifics, it still does not get into the issue of how Obama's "tax the rich" plan would affect deficit spending.

Taxing the Rich: Obama would let the two top tax rates revert to their 2000 levels—36 and 39.6 percent. He’d raise rates on capital gains from 15 percent to 20 percent for high-income households, and hike the rate on dividends to 39.6 percent. This would be on top of the scheduled 3.8 percent tax increase on investment income due to take effect next year. He also says no household making more than $1 million should pay a smaller share of their income in taxes than a middle-class family (aka the Buffett rule). However, he has not said how he’d achieve this.

Back on August 15, 2011 the Wall Street Journal ran this article: Would Taxing the Super-Rich Raise Much Revenue?:

But one thing is certain: While raising taxes on millionaires might be emotionally and politically satisfying for some, it would only begin to fill the nation’s budget hole.

A lot of enticing headlines, but little substance in disclosing the impact of what Obama's "tax the rich" fiscal plan would have on ameliorating deficit spending.

 

[Galaxiom]

Making the rich pay a bit more tax will see them starved to death?

I expect the real problem is like in Australia where the truely rich have teams of lawyers and accountants to structure their income with family trusts and pay very little tax at all.

 

[Adam Caramon]

Just curious: anybody actually done the math on taxing the rich? If you took every dollar away from the rich and put it into the treasury, leaving the rich penniless and unable to pay taxes (or eat), what would that do to the "fiscal cliff?"

I know the Fox News crowd has been led to believe that the purpose of raising taxes on the rich is to move towards a utopian communist/socialist/fascist/other bad "ist" society, but in truth it is to limit spending cuts.

Medicare, Medicaid, Pell Grants, Veteran's benefits, all of these come from "spending". If you raise 700 Billion through additional tax increases, that's 700 Billion less that you have to cut from various programs in order to reduce the deficit.

 

[Adam Caramon]

Making the rich pay a bit more tax will see them starved to death?

I'm convinced that once you hit a certain age in America, facts are no longer important. It must be something to do with being set in your ways, not wanting things to change, etc. The arguments that I hear some people come up with are incredibly laughable.

 

[georgedwilkinson]

I know the Fox News crowd has been led to believe that the purpose of raising taxes on the rich is to move towards a utopian communist/socialist/fascist/other bad "ist" society, but in truth it is to limit spending cuts.

I don't have or watch Fox News so I can't comment on that.

Medicare, Medicaid, Pell Grants, Veteran's benefits, all of these come from "spending". If you raise 700 Billion through additional tax increases, that's 700 Billion less that you have to cut from various programs in order to reduce the deficit.

Do we have 700 billionaires in the US we can take a Billion dollars each from? That sounds like it would be a pretty good boon to reducing the deficit (though only a small hand full of what needs to be done).

When talking about taxing the rich, you need to make sure that whatever parts of the problem cannot be solved by taxing the rich can be resolved by other means (for instance, through a sound budgeting process, AKA: spend less than you make). To do less would make people on the interwebz accuse you of not considering facts to be important.

One of the problems coming from Washington is that nobody is willing to look at other solutions. Yeah, we all hate those billionaires and they deserve to have everything taken away from them. But once we've stripped them of all their wealth, how do we deal with the other $15+ Trillion. Does it magically go away because we feel good about sticking it to the man?

Like I said before, President Clinton and a Republican Congress solved this problem so it can be done even when there are bipartisan issues. Will a leader somewhere in government step forward and get it done?

 

[Adam Caramon]

Do we have 700 billionaires in the US we can take a Billion dollars each from? That sounds like it would be a pretty good boon to reducing the deficit (though only a small hand full of what needs to be done).

George, are you familiar with the proposal to allow the Bush tax cuts to expire for individuals making more than $200,000 ($250,000/joint) that has been floated around since 2010 and the projected revenue that it would raise?

When talking about taxing the rich, you need to make sure that whatever parts of the problem cannot be solved by taxing the rich can be resolved by other means (for instance, through a sound budgeting process, AKA: spend less than you make).

Yes, that's called "spending cuts". Those have been on the table for 2+ years. Cuts to Medicare/Medicaid, an increase in the retirement age, etc, have been discussed.

One of the problems coming from Washington is that nobody is willing to look at other solutions. Yeah, we all hate those billionaires and they deserve to have everything taken away from them. But once we've stripped them of all their wealth, how do we deal with the other $15+ Trillion. Does it magically go away because we feel good about sticking it to the man?

Are you aware that raising tax rates back to previously set levels does not take away all of a rich person's money? Tax rates only effect earned income, they do not find how much money you have stored in various financial institutions and tax that as well.

 

[georgedwilkinson]

George, are you familiar with the proposal to allow the Bush tax cuts to expire for individuals making more than $200,000 ($250,000/joint) that has been floated around since 2010 and the projected revenue that it would raise?

Yes, I'm familiar and no: I have heard no reliable projections of increased revenue, though I'm sure there would be an increase in revenue. I'm pretty sure the increase in revenue would not be $16 Trillion, though.

Yes, that's called "spending cuts". Those have been on the table for 2+ years. Cuts to Medicare/Medicaid, an increase in the retirement age, etc, have been discussed.

That is my recollection also.

Are you aware that raising tax rates back to previously set levels does not take away all of a rich person's money? Tax rates only effect earned income, they do not find how much money you have stored in various financial institutions and tax that as well.

Yes, I am very aware of that. But the mantra is "tax the rich." That is a totally different strategy than just letting the Bush tax cuts expire (which would affect more than "the rich"). The rich only have so much to take away and my illustration says what would happen if you took everything away from the lousy ne'er do wells. If I were to assume for illustration's sake taxing them only on their income, I would have to assume much less revenue, I would guess. What do you do about the rest of it? And more importantly, will somebody LEAD the country in resolving this issue or just point fingers and say the same old things over and over again?

 

[Adam Caramon]

Yes, I'm familiar and no: I have heard no reliable projections of increased revenue, though I'm sure there would be an increase in revenue. I'm pretty sure the increase in revenue would not be $16 Trillion, though.

The projections I have seen are 700 billion/10 years.

As far as your 16 Trillion statement, there is a difference between the deficit and the debt. Getting the deficit under control is the first step in lowering the debt.

Yes, I am very aware of that. But the mantra is "tax the rich." That is a totally different strategy than just letting the Bush tax cuts expire (which would affect more than "the rich").

Yes, the thought is that allowing the Bush tax cuts to expire for the rich will not impact their quality of life as severely as it would the non-rich.

The rich only have so much to take away and my illustration says what would happen if you took everything away from the lousy ne'er do wells.

That is what your illustration says, but no one is proposing that. As such, it seems that you are trying to exaggerate the other side's view point to absurdity. If you think what is proposed is bad, point out the bad points in the actual proposal rather than your illustration.

What do you do about the rest of it? And more importantly, will somebody LEAD the country in resolving this issue or just point fingers and say the same old things over and over again?

What does leadership look like to you? Is it running in an election on your proposals? Is it giving in to the minority party in order to get something passed rather than the right thing passed?

 

[georgedwilkinson]

What does leadership look like to you? Is it running in an election on your proposals? Is it giving in to the minority party in order to get something passed rather than the right thing passed?

One of the many times I said it:

Like I said before, President Clinton and a Republican Congress solved this problem so it can be done even when there are bipartisan issues.

That was leadership. The deficit was addressed and the debt was going down.

You are right on the difference between deficit and debt. Both need to be addressed I would think.

If I thought I had the answers, I would, no doubt, have put myself into politics. Alas, all I have the skill to do is observe and complain, seemingly like everybody else.

 

[Adam Caramon]

If I thought I had the answers, I would, no doubt, have put myself into politics. Alas, all I have the skill to do is observe and complain, seemingly like everybody else.

Alright, my mistake. I had assumed based on your initial post that you were making a point and trying to defend it as a better alternative to what is currently happening, and thus I was trying to extract specifics from you.