Post 1 for Tri 2! Due 12/14/12
So everyone in Washington is discussing...the gender of Kate & William's baby, right? Just kidding the Fiscal Cliff obviously! This trimester we focusing on public policy for the blog.
My suggestion is to do some reading about the fiscal cliff discussion (especially if you don't have a background to this issue) and then compose a post which answers the following prompt questions:
**Do you think that Congress will go over the fiscal cliff?
**If you were a leader in Congress (not the White House) what would you push for and why in the negotiations? (You can be from either the Democratic or Republican Party and in either house.)
Aside from your personal agenda, what do you think that the president and Congress should do for the good of the country on this issue (offer a specific proposal - don't just say they should make a deal and get along). Explain what you think they should vs. should not give up in negotiations.
I look forward to reading your posts. There is a lot of writing on this topic so there shouldn't be any trouble getting evidence to support your argument.
posted by Ms. Aby @ 6:35 PM
42 Comments:
Everyone knows that the most important issue going on in Washington is the fiscal cliff and if we will go over it. It has had an impact on everyone and the effects can be seen in places like Wall Street, where speculation has caused stocks to be affected. It will also affect low and middle income people who will be hit with a 2% increase tax on their income making it harder to be financially secure. I believe that the government will go over the fiscal cliff because the two parties are still too far apart from an agreement. As Speaker Boehner has stated to the press, he feels that Obama is “ slow-walking” to fiscal cliff. He points out that Obama is stalling and making things worse because he doesn’t seem serious (1). If the President Obama is in reality stalling, that is not the behavior or leadership that is needed at the time. However, regardless of that fact people can’t go back to blaming each other for the problems. They need to compromise and produce results not arguments. If I were a lawmaker in Congress I would propose that the Bush tax cuts be extended and automatic spending cuts be cancelled. This would result in a modest growth for the economy while no major economic hit would occur (2). It would not be a permanent solution but it would buy lawmakers more time to solve issues. If lawmakers would not agree to that then a bigger proposal could be brought up. The revenue increases are a big issue that could be solved or negotiated. Democrats initially proposed 1.6 trillion but have brought that number down to 1.4 trillion, while Republicans push for 800 billion. They need to focus on a number that is closer together. Another thing that could be fixed is the amount that each side wants in spending cuts. However, Speaker Boehner claims that Obama is making it harder by not naming specific cuts he is willing to give so that an agreement can be dealt upon (3). Again that is a big reason I believe that the country will go over the fiscal cliff, because there seems to be no negotiations but a lot more disagreement and finger pointing. I also believe that Obama and the Democrats have a little more leverage with their big win in the election and can use that to their advantage. I believe that with this in mind the Democrats might wait out a let us go over the fiscal cliff and make Republicans more desperate and eventually more willing to accept some or more of their terms. Regardless, I still believe that we will go over the fiscal cliff.
1.http://abcnews.go.com/blogs/politics/2012/12/boehner-to-update-house-on-fiscal-cliff-at-noon/
2.http://bonds.about.com/od/Issues-in-the-News/a/What-Is-The-Fiscal-Cliff.htm
3.http://www.cbsnews.com/8301-250_162-57558603/wh-boehner-trade-new-fiscal-cliff-proposals/
I want to start out by giving an overview of the fiscal cliff proposals and situations. Obama’s plan to prevent us from going over the fiscal cliff (the expiration of Bush tax-cuts, and automatic spending cuts), includes closing loopholes, limiting reductions, raising the estate tax rate back to the 09’ levels, an increase in taxes on capital gains and dividends, a 50 billion dollar stimulus package, a home refinancing plan, and an extension of the payroll tax cut (1). John Boehner, the Republican House leader, refused to hold a vote on Obama’s plan in the House due to the proposition of an increase in the top two percent’s tax rate, and instead put forth his own plan that rejects higher tax rates for the wealthy (1). It would include deficit savings of 2.1 trillion in the next ten years which is inclusive of 800 billion from tax reform, 600 billion from Medicare reform and other health savings, and 600 billion in other spending cuts. Both sides truly believe that the other side is not serious about making a deal that would prevent us from going over the fiscal cliff (1). Economists claim that the fiscal cliff will damage U.S. growth since small businesses would have less money to invest in production and personal disposable income will fall as well (1). One of the major problems is that the Republican Party is reluctant to compromise, but not necessarily because they disagree with Obama’s plan. Republican House member Tom Cole of Oklahoma stated that he approved Obama’s plan and it would, “allow the broader negotiations to move forward (1).”
I do believe that we will not go over the fiscal cliff and negotiations in the upcoming weeks will prevent us from going over. Even though both sides are firm on their stances regarding the proposals, I believe the Republicans will have to give in due to a major lack of leverage in negotiations. They have a lack of leverage for three reasons (2). “1. The central issue of the fiscal cliff talks favors Democrats overwhelmingly.” About two thirds of people polled, favors Obama’s approach of handling the fiscal cliff and more specifically an increase in the high-income earners’ tax rate (2). “2. Even the secondary issues don’t favor the GOP.” Republicans favor entitlement reforms and revenue increases from limiting deductions. These however, are unpopular as “According to a new Quinnipiac poll, 70 percent of Americans oppose cuts to Medicaid and 51 percent oppose raising the Medicare eligibility age. And a recent Washington Post-ABC News poll actually showed that second figure significantly higher, at 67 percent (2).” “3. Americans trust President Obama and the Democrats more.” Obama’s approval rating is now at 53% and while 56% of people think that Obama will handle the fiscal cliff issue appropriately, only 43% of people think that the Republicans will handle it well (2). Obama now states that he is “optimistic” that he will reach a deal with the Republicans and that the Republicans will agree to extend the tax cuts for most Americans (4). He states that "I'm pretty confident that Republicans would not hold middle class taxes hostage to trying to protect tax cuts for high-income individuals," while stating that he is willing to compromise on spending cuts if Republicans allow for an increase in the higher income tax rates (4).
I agree with Moody's Analytics chief economist Mark Zandi in that we should not reach an agreement by the end of the year if it is not a solid and sound deal (3). Our priorities should not only be to avert the fiscal cliff, but also to “address the nation's long-term fiscal sustainability by modifying entitlement programs like Social Security and Medicare, and we must extend the debt limit (3).” My solution or the ideal solution I would push for parallels that of Zandi’s. It would include a 1.4 trillion in new tax revenue, half from higher taxes, and half from tax reform. My plan would also include 1.2 trillion in spending cuts, which would be inclusive of Social Security, Medicare, and Medicaid, modifications (3). This plan would be best since it would leave 400 billion in net interest savings, which would amount to “$3 trillion in deficit reduction over the next 10 years (3).”
I strongly believe that for the good of the country, Republicans must cave or give in and let the tax cuts expire on the top two percent in America. For the good of the remaining 98% of the people, this is one component that is a must and must be passed to solve a long term problem. However, Wall Street also needs to be protected. Republicans must not give in when it comes to an increase in capital gains and dividend taxes. Investing will plummet if these taxes go up and “the rush to avoid higher taxes on portfolio gains could cause additional weakness,” in the economy (5). Also, in order to solve the debt and deficit crisis, we must cut spending and Republicans should hold out on their proposed entitlement cuts and reforms specifically on Medicare and Medicaid (6). Republicans however are frustrated: “We’re still waiting for the White House to identify what spending cuts the president is willing to make as part of the balanced approach that he promised the American people,” Boehner said on the House floor today. “Where are the president’s spending cuts (6)?”
1. http://fox2now.com/2012/12/03/house-gop-proposal-on-fiscal-cliff-rejects-obamas-tax-plan/
2. http://www.washingtonpost.com/blogs/the-fix/wp/2012/12/06/republicans-severe-lack-of-leverage-on-the-fiscal-cliff/
3. http://www.cbsnews.com/8301-250_162-57557581/economist-go-over-fiscal-cliff-if-it-means-a-better-deal/?pageNum=2
4.http://www.huffingtonpost.com/2012/12/11/obama-fiscal-cliff-deal_n_2280785.html
5. http://www.dailyfinance.com/2012/12/11/fiscal-cliff-tax-worries-may-drive-stock-sell-off/
6.http://www.washingtonpost.com/blogs/wonkblog/wp/2012/12/11/today-in-fiscal-cliff-could-entitlements-derail-a-deal/
It is my opinion that Congress will not allow the economy to fall over the fiscal cliff, a series of spending cuts that, if allowed to come into effect, would send the economy back into recession. This is because allowing the fiscal cliff to happen would be damaging an already reeling and divided Republican Party. As demonstrated by the debt ceiling crisis over the summer, the Republican Party is unwilling to risk being caught in the crosshairs of public opinion, which suggests that eventually, they will find a path to compromise, a path which will likely head to the left.
If I were a Democratic leader in Congress, I would first realize that my party holds the upper hand. We hold the Senate, which will allow us to kill any Republican proposals in the house without a Presidential veto. This will help preserve the President’s image. Furthermore, public opinion polls show that public has sided with Obama for the time being on the negotiations (1). While this may not directly affect many Republican legislators, due to the anti-Obama nature of their bases, it has created friction between the moderate and further right elements of the House caucus, signaled by the dissent of many House Republicans on the GOP’s “no-taxes pledge (2).” Furthermore, my president has just won re-election, giving him additional leverage over Congress. With those advantages in mind, I would double down on the Republicans in these negotiations, in effect stating “it’s our way or the highway,” while giving a few concessions to give the appearance of compromise. I would push for immediate elimination of the Bush tax cuts for those making over $250,000, closing of tax loopholes, and a gradual phasing-out of the Bush tax cuts for the rest of the populace over five years. This will turn part of the fiscal cliff into more of a fiscal slope. I would also allow moderate spending cuts to entitlement spending, because this will be good for the economy in the long run, and give the Republicans something to vote for. Again, these cuts would need to be phased in. Finally, because I am in the position of power, I would force the Republicans to accept cuts in defense spending, which at current levels in unsustainable. Given the Republican’s November disaster and the polling data, they will likely choose to swallow the bitter pill than bear a large portion of any resulting public anger.
On the other hand, if I were a Republican leader, there is a gambit I could try to run to nullify the President’s advantage. The current combination of spending cuts, a result of the debt ceiling deal, are sequestration and can be repealed by Congress. Thus, the Republicans should, if they are able to hold party discipline, put forth a spending bill that repeals the fiscal cliff and replaces it with a series of moderate-conservative spending cuts and revenue increases over a period of time. For appearance’s sake, the plan must be viable, and should be introduced at the 11th hour, to prevent Democrats from marshaling a counter-offensive. This would put the Democrats in the position of having to reject a centrist offer and allowing the economy to go over the cliff, a position which would nullify part of their popular advantage and partially shift blame over to the Democrats. Of course, this may very well not work, but the Republican Party will have to decide at one point if the pain of swallowing the Democrats’ plan exceeds the risk from pulling a political stunt.
1. http://www.telegraph.co.uk/news/worldnews/barackobama/9740918/Barack-Obama-has-the-public-vote-on-fiscal-cliff-say-polls.html
2. http://www.nj.com/us-politics/index.ssf/2012/12/gop_tries_to_quell_dissenters.html
Well the “Fiscal Cliff” appears to be upon us. Despite the “cliff” in the name of this problem, the economic reaction will not be immediate. “taxes technically will go up on Jan. 1. And yes, federal spending will be cut on Jan. 2, but you really won't start to see any real effects of that for a couple of weeks at the minimum and maybe not even until the end of the month” (2). So technically all the horrible things politicians are saying will happen but there are a number of things the federal government can do to halt that progress in the hope that the White House and Congress could make a deal. As of today speaker Boehner called the talks with Obama “deliberate” and “frank”(1). This is a slight improvement in his wording from last week. At this rate I have a feeling that we will go over the fiscal cliff. The two parties are ideologically very far apart on the issues of taxes and spending. Not to mention with the track record of divided government, not many hot button issues have been resolved, let along in a timely manor. As cliched as it sounds, if I was a leader in Congress I would try to get everyone to compromise. I believe that we do need to raise taxes on the wealthiest 2% Americans. But that would solve all the problems. I believe that there are some federally funded programs that can survive a funding cut, so that we decrease some of our deficit spending. One other issue is corporate taxes. “Among the world’s advanced economies, the U.S. has the highest tax rate on corporations” (3). After all the “deductions from their tax bill, the average effective tax rate is more like 27 percent” (3). This issue has just come to the forefront of the discussions. Republicans want “serious spending cuts and reforms to entitlement programs such as Medicare, Medicaid and Social Security” (1). I would agree to some minor changes to these programs, but none that are too drastic, since many elderly people rely on these programs. As said not all the horrible effects would be felt immediately, but one thing would change is “immediately there would be market reaction — a dive in stock prices” (2). Despite what I feel will happen I hope we can reach an agreement.
1.http://www.cnn.com/2012/12/12/politics/fiscal-cliff/index.html
2.http://www.npr.org/2012/12/11/166931415/what-happens-if-we-fall-off-the-fiscal-cliff
3.http://www.nbcnews.com/business/economywatch/corporate-tax-battle-enters-fiscal-cliff-fracas-1C7529989
The Fiscal Cliff is easily the most pressing issue faces congress at the moment. It has an imminent deadline, affects millions and has lead to divisive partisan bickering. If I were (God Forbid) a congressman I would stick to party lines. I personally think that protections of the wealthy in respect to tax cuts are ridiculous. The Republican party, however has a long history of pandering to the rich(1). I would allow the cuts to the wealthy to expire while simultaneously re-instating the cuts for the middle class. If we are to get back on our feet cutting the amount of disposal income of the average American is not the way to do it. This argument is interesting as it seems to be casting a shadow on the popularity of Speaker of the House John Boehner(2). His failure to unite the Republicans against a compromise with the Democratic Minority is very telling to party unity(2). Indeed, Obama holds many cards in this game. He can easily play the 'blame' card on the Republicans for failing to compromise(3). In this case many Americans would become further disillusioned with the Republican Party as they saw their taxes increase by 2%. A pew research poll revealed that 53% of Americans would blame the Republicans if a deal was not reached whereas only 27% would blame Obama (3). As divisive as this issue is, I again state that I would hold to Democratic Party Lines and fully support Mr. Obama in his endeavors.
1) http://www.nytimes.com/2012/11/05/opinion/republican-tax-priorities.html?_r=0
2) http://www.theatlantic.com/politics/archive/2012/12/could-john-boehner-lose-the-house-speakers-gavel/266016/
3) http://www.latimes.com/news/politics/la-pn-gop-fiscal-cliff-blame-20121207,0,3860921.story
The fiscal cliff is definitely an important issue faced by Congress. The issue has become shrouded by party politics and political rhetoric. I believe that Congress will not go over the fiscal cliff. The majority of Americans want a compromise in the issue (1). This will most likely lead to an agreement being reached at some point. They will probably drag it out in an attempt to make the compromise in order to get more favorable terms for their side. However, the consequences for both sides would be too severe to not make a compromise. I believe that a compromise on the issue is necessary. While the deficit needs to be drastically cut, and soon, this manner of cuts could lead to severe economic problems.
My solution would be both a small tax increase on the wealthy (I wish I didn’t have to raise taxes on anyone, but the Democrats would never allow such a modest proposal to pass), as well as cuts to entitlement programs. The congressional Joint Committee on Taxation has estimated that about 940,000 taxpayers would have net business incomes in 2013 and earn enough to put them in one of the top two tax brackets. Not all of these people are CEOs of major corporations. Some of them are small business owners, and raising their taxes would hurt the economy further. In addition, entitlement programs have to be cut. $473 billion was spent on such programs, we can’t afford to continue paying such a large tab. Budget reduction will not be pleasant, but it is necessary for the good of our country. In conclusion, compromise is the key to solving the fiscal cliff problem, although I am more sympathetic to the Republican position than to that occupied by the Democratic Party.
1. http://www.businessinsider.com/fiscal-cliff-poll-compromise-obama-republicans-boehner-tax-increases-spending-cuts-2012-12
2. http://www.reuters.com/article/2012/12/11/us-usa-fiscal-ceos-idUSBRE8BA11P20121211
3. http://usbudgetalert.com/spending.php
Ben Bernanke used the term “fiscal cliff” to describe the consequences of congressional decisions that have been made (1). Around January 1st, about $500 billion in tax increases and $200 billion in spending cuts are supposed to go into effect. According to the National Budget Office, this is about 4% of the GDP and could cause the nation to go into a recession (1). Both the Democratic Party and the Republican Party believe that this shouldn’t happen, but they cannot decide on a way to solve the impending issue. President Obama’s plan to prevent going over the fiscal cliff involves: limiting reductions, raising estate tax rate, closing loopholes, increase taxes on capital gains and dividends, home refinancing plans, a $50 billion stimulus package, and extending the payroll tax cut (2). John Boehner, Speaker of the House, has rejected Obama’s demand for more revenue (2). This disagreement has caused people to be especially weary of the possible crisis.
It is possible that lawmakers will not reach a deal by December 31st, which means that the U.S. would go over the fiscal cliff (1). However, this does not mean we will be going into a recession right away. Since the effects of going over the cliff would, overtime, take full force, there would still be enough time for compromises between the two parties to be made. Currently, people are talking about a “grand bargain,” between the parties, which would include: a mix of spending cuts and tax increases that are gradually phased in over the next decade (which would bring down the U.S. national debt), and changes to entitlement programs such as Social Security, Medicare and Medicaid (1). Personally, I don’t think that Congress would go over the fiscal cliff even though there is a lot of disagreement between the parties. This is because of the “grand bargain” that is being talked about. There’s proof that other grand bargains, such as the Simpson-Bowles bargain have gradually started to become effective (3&1). In my opinion, it is the most viable option with the most potential success, especially since both parties agree that something needs to be done. If I were a leader in Congress, I would push for a grand bargain, even if it occurs after the nation goes over the fiscal cliff. It would be extremely effective for both parties to compromise on spending cuts, tax increases and change entitlement programs in order to improve and protect the financial situation.
1) http://www.washingtonpost.com/blogs/wonkblog/wp/2012/11/27/absolutely-everything-you-need-to-know-about-the-fiscal-cliff-in-one-faq/#whatis
2) http://fox2now.com/2012/12/03/house-gop-proposal-on-fiscal-cliff-rejects-obamas-tax-plan/
3) http://wercampaign.org/2009/02/04/the-meaning-of-obamas-grand-bargain-john-richter/
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1)http://moneymorning.com/tag/fiscal-cliff-2013/
2)http://moneymorning.com/2012/12/06/fiscal-cliff-2013-why-its-looking-like-no-deal/
3)http://www.npr.org/2011/07/14/137800715/the-man-behind-the-gops-tax-pledge
4)http://www.washingtonpost.com/blogs/wonkblog/wp/2012/12/10/the-five-keys-to-a-fiscal-cliff-deal/
The first thing I saw when I started researching the fiscal cliff was the number 600 billion. $600 billion dollars of tax increases and spending cuts if Congress and the president do not come to an agreement before the start of the new year (1). 600 billion anything is a lot. But so is 16 trillion, which happens to be the US debt (1). So will our government be able to work together and find a solution between cutting and taxing? Should we go over the cliff to give ourselves a wake up call? Only time will tell.
The bottom line about if we will go off the cliff or not is whether or not Republicans and Democrats can compromise. Two things are certain: one is that President Obama does not have to worry about getting re-elected. He does not have to worry about people liking him enough to vote for him again. After this term, he is done forever. Who does going over the fiscal cliff look bad on? Republicans because they are the ones that need to worry about having a track record for getting elected again. They are the ones not budging on hiking up tax increases on people earning over $250,000 (2). The other certainty is that if the fiscal cliff does happen, middle class people are going to be the ones suffering the most. Seeing 50 percent tax rates will indubitably strain the middle class who will then blame Republicans for not simply taxing people who are more able to handle it (2). I found an article about a man, Grover Norquist, which urges Republicans to take a pledge that says they will never under any circumstances raise taxes (3). With this kind of attitude nothing will get accomplished. I do believe we will be going over the fiscal cliff. Has this country ever been able to compromise under pressure? Unless this event sets a precedent, I believe that we will fall off the cliff, voters will become upset with the government as an institution that cannot work together, and we will finally have the money we have been needing for the past decade to start chipping away at our national debt.
If I were a member of Congress, I would focus on several topics to compromise on. First I would suggest a tax increase on the wealthiest two percent. This would help to lessen the burden of the middle class, which I believe is the most important. If you take away middle class spending, the economy will suffer because the majority of people will not be spending on wants but only on necessities. Second, I would look into what to cut to deal with Republican concerns and wants. The Medicare debate should be trashed. Many studies show that raising the Medicare age would actually increase national health spending (4). Republicans need a new goal if they want to get into the compromise game. Cutting military spending would surely free up some money but alas, Republicans would never go for it. The bottom line is that taxes need to increase and spending needs to be cut. The areas that are cut and who will be taxed are the hot button items no one knows what to do with.
Congress will not go over the fiscal cliff. It can’t. It simply can’t. It has a current job approval of a surprisingly generous 20%, a horrible statistic that looks good only when compared to the abysmal 10% Congress had in September (1). A tumble over the cliff would be disaster. The gridlock in Washington would have “fallen” to new and astonishing heights – heights, or mountains, or “cliffs,” or whatever that would be politically detrimental to each member of Congress. That being said, a deal must be made, and as a congressional leader I would push for revenue increases to outweigh budget cuts since revenue increases would be more popular and less economically damaging (2). I would make sure taxes on the wealthy are increased since that would provide a strong base for revenue (with details explained later) and entitlement cuts are kept to a minimum to continue valued assistance to the poor and elderly. Both of these, as a Democratic leader, could be leveraged using popular opinion which favors revenue in proportion to cuts (2). The entitlement cuts are necessary cuts and ones that are at the heart of the budget discussion, so such a concession should be made by a Democratic leader. Looking at the big picture, Congress should allow the expiration of the Bush tax cuts for the top 2% of taxpayers, small elements of tax reform, and modest cuts to both defense and entitlements. The increase of rates for the wealthy from 33% to ~39% will increase revenue up to $1.4 trillion according to the President’s most recent offer (3). Americans agree as 49% favor the president while 25% favor House Republicans (3). This $1.4 trillion is a strong step in reducing the deficit as is modest tax reform. Multiple loopholes and deductions can be eliminated, but specifically reform should prevent large rises in corporate taxes (which would occur with the fiscal cliff) while eliminating corporate loopholes that result from overseas headquarters and monetary transfers. While falling over the cliff would result in ultra-high corporate rates, corporate rates should be reformed since they are currently taken in “below-average” to the real rates (2). Reform would ensure corporations are not burdened by otherwise increased rates but are also not evading such rates. Other reforms would eliminate tax loopholes and establish “doughnut hole” policies to increase revenue and simplify the code as well. Concerning defense cuts, the size of the nation’s military contracts are massive and completely unnecessary. With wars winding down and the economy becoming a larger crisis to national security than even terrorists (4), deficit-reduction is far more imperative than jet, tank, and cruiser production. Now, I could go on and on about the military-industrial complex, but there’s one main point to be made: if jet, tank, and cruiser producers lose their contracts by cuts to defense spending, jobs will only be momentarily lost. Those production facilities could very well switch to consumer goods, thus spurring new production, jobs, and competitive prices for (for example) refrigerators since there are more producers. In the end, the government and military have fewer contracts and smaller defense budgets in what could very well be a long-run gain for trimming the deficit, consumers, and producers. Also, entitlement cuts will be enacted, not only as a compromise between parties, but as a necessity for calming social spending. Congress should compromise to decrease the COLA of Social Security as well as to increase the age of Medicare.
Just as Republicans should bite the bullet on taxes, Democrats should bite the bullet on social spending. However, I would like to point out once again the necessity of raising revenues more than trimming overall spending, but especially social spending. Too many Americans rely on government programs to cut them as a way to evade higher taxes on the wealthy. The good of the country demands a government without high deficits but also a government that does not abandon progress and benevolence. Hopefully such plan, or any that acknowledges that truth, will be enacted.
1. http://www.realclearpolitics.com/epolls/other/congressional_job_approval-903.html
2. http://thehill.com/blogs/on-the-money/domestic-taxes/140443-liberal-group-use-tax-reform-to-reduce-deficit
3. http://www.cnn.com/2012/12/12/politics/fiscal-cliff/index.html
4. http://www.cnn.com/2012/12/12/opinion/gard-johns-military-spending/index.html
The issue of the fiscal cliff is the hot topic in the United States currently. The whole country is waiting to see what congress is going to decide. The fiscal cliff is the experatio of tax-cuts from Bush’s presidency and automatic spending cuts. Obama wants to extend the tax cuts to middle and lower class Americans and not to individuals making more than $200,000 and married couples making more than $250,000 (4). Small businesses argue that this will negatively impact the economy. It will reduce growth in the economy by .01 percent, which is approximately 200,000 fewer jobs (4). Republicans in Congress argue for the business owners, seeing them as a tool for economic growth. They do not believe that higher taxes will help the economy (4).
There needs to be compromise in Congress. According to the LA Times the Democrats have an edge in public support regarding the negotiations (2). A majority of both Democrats and Republicans want the party leaders to compromise and reach a deal (2). That majority is sixty percent of Republicans and seventy precent of Democrats (2). I believe that the Democrats in Congress will stand their ground until the Republicans are willing to negotiate because they have the advantage even without having a Democratic President. I found an NBS poll that showed who Americans will blame if Congress fails to reach a compromise. Fifty-six percent of the respondents sad that they would blame both sides equally while only nineteen percent will blame the Democrats and twenty-four the Republicans (2).
Another commonly asked question regarding the fiscal cliff is about the Republican Speaker, John Boehner. Many people are curious not only about his opinions, but whether or not they are affected greatly by his upcoming election (3). He says that his goal is “to get to an agreement with the president of the United States that addresses this problem (3).” He also says that “The President wants to pretend spending isn’t the problem. That’s why we don’t have an agreement.” In my opinion that is not trying to compromise. Many Democrats have suggested that he is trying to protect his speakership (3).
I do not think that we will go over the fiscal cliff. I think, and hope, that there will be negotiations and that Congress will pay attention to what the people that they are representing want them to do.
2.http://www.latimes.com/news/politics/la-pn-fiscal-cliff-democrats-poll-20121213,0,5974227.story
3.http://www.huffingtonpost.com/2012/12/13/john-boehner-fiscal-cliff_n_2294209.html
4.http://www.denverpost.com/healthcare/ci_22162695/obama-tax-plan-no-small-deal-small-businessmen
The impending fiscal cliff is an obstacle that Congress itself set in place, but even so, the nation’s leaders seem to be unable to form an agreeable solution. With fewer than three weeks left before the deadline, each party is still having problems unifying underneath one plan. The Republicans, led by speaker John Boehner, cannot even agree on their own stance, with some heavily conservative members vowing not to vote for any proposals with tax increases even while speaker Boehner tells Obama the opposite (1). The Democrats also have a hand in delaying any deals; by refusing to specific budget cuts that Republicans want, such as raising the Medicare age, they deny any chance at compromise (2). With both parties in such disarray, and with neither negotiation leader willing to sacrifice what he or she wants, I think that there’s a strong chance of the country going over the fiscal cliff. On top of this, the president is no longer looking for reelection, which may mean he is more willing to follow through on his threats and not kowtow to the Republican majority in the house.
If I was a leader in the white house, I would be prepared to raise taxes above what the Republican leader is suggesting (800 billion over ten years) and below what Obama is proposing (1.2-1.6 billion over ten years), because to me, deficit reduction is much less important than the continuing health of our economy. We should be able to reduce the deficit in the long term without seriously damaging the economic well being of the country. Of course, this tax increase (or rather, a lack of tax cuts) would need to be accompanied by major spending cuts, but again, not to the extent that it would hurt our well being. The Democrats’ refusal to address social security and entitlements now is reasonable only because the system needs a much more comprehensive solution than one that can be agreed upon in such a tense and time-crunched situation as this.
In the end, the two parties need to compromise and find a moderate plan that will reduce the deficit in the long term, but there is no hurry for deficit reduction and as such the plans don’t need to be as proactive or severe as some people propose. Many of the possible solutions to wasteful aspects of government or ways to increase tax revenues can be dealt with in a smoother way than immediately coming up with a drastic change before January 1st, and the compromise should reflect this, allowing for further discussion as the year rolls on. Not only do I believe Congress needs to take the middle path, but so do the majority of Americans, with a recent poll finding that 65% of people support a deal including both increased tax rates and cuts to social security (3).
(1) - http://www.nytimes.com/2012/12/13/us/politics/boehner-tries-to-contain-defections-on-fiscal-unity.html?pagewanted=1&_r=0&ref=politics
2 - http://www.washingtonpost.com/politics/gop-republicans-dig-in-on-fiscal-cliff-talks/2012/12/13/019a212e-4537-11e2-8061-253bccfc7532_story_1.html
3 - http://www.latimes.com/news/politics/la-pn-fiscal-cliff-democrats-poll-20121213,0,5974227.story
After reading a few sources on the fiscal cliff, I believe that Congress and the President will not come to an agreement before January 1st and taxes will be immediately increased. I have found that the Republicans are unwilling to compromise and that Democrats are unwilling to create further cuts and to let the richest 2% of Americans be taxed the same as all other Americans. Reported by the Washington CNN it says that Republicans “so far refuse to accept and increase in tax rates as demanded by the president” (1). This does not in any way look promising. That statement shows that no matter what, Republicans are never going to agree with the Democrats deal because that involves tax increases for the top 2%. The Republicans have recently proposed to extend the Bush-era tax cuts to all Americans and to not raise taxes for anyone (1). However, President Obama and the Democrats clearly have stated that unless higher taxes are given to the highest earners, no deal will be made. I stalemate has taken place and it looks like both sides are refusing to budge.
If I was a leader in Congress I would side with the Democratic Party and push for a tax increase on the wealthiest 2% and to keep tax cuts for 98% of Americans. I believe that having tax rates stay at the level they are now is best for most Americans. I do, however, believe that the wealthiest 2% should have to pay more in taxes because they have more to give. Why should someone barely making it by in the world have to pay the same amount of taxes as someone who is making thousands of dollars a day if not more. I would also allow for more cuts in budget where possible. I would not push to raise the age for Medicare or Social Security. I would also make sure that education spending was not reduced. I would push for cuts to be made in other places that are not as crucial in society as those are right now.
For the good of the country, Congress and the President should extend tax cuts to all Americans except for the richest 2% of Americans. This is in the best interest because it is a compromise. Already the Senate has approved of President Obama’s tax plan and now it is only up to the House (3). It was also found that 7 in 10 Americans approve of taxing the wealthiest 2% of Americans (2). A large group of Americans support this decision. Many also agree with President Obama and the Democrats with a 55% approval rating that is twice as great as the approval rating for Republican congressional leaders (2). For the good of the country, it is also smart to listen to what Americans believe. I believe that tax increases all around for 100% of Americans, is not a good idea. It will reduce how much money people have, reducing their spending, and increasing their dislike for the government and for their inability to compromise. It is in the best interest of everyone in Washington to try to come up with a compromise that will not tighten up spending for Americans even more. I also believe that Democrats should agree to more spending cuts because it will help reduce the deficit and make it easier to strike a deal with the Republicans. The only movement made by the Democrats was to lower their revenue demand to $1.4 trillion from $1.6 trillion (3). That is not a huge decrease in the eyes of the Republicans so something more needs to be done.
Overall, with everything I have read, I believe a deal seems at this point not likely. Democrats are not willing to decrease taxes for every American and cut huge amounts of spending and Republicans are not willing to allow the top 2% to be taxed more. There seems to be no middle ground as of right now that may spark an agreement among the two parties. It looks hopeless.
1) http://www.cnn.com/2012/12/12/politics/fiscal-cliff/index.html
2) http://www.huffingtonpost.com/2012/12/13/fiscal-cliff-poll-pew_n_2292151.html?utm_hp_ref=mostpopular
3) http://www.click2houston.com/news/election-2012/Obama-Boehner-to-meet-on-fiscal-cliff/-/2574696/17764938/-/3drkku/-/index.html
I guess I’d better post this before I get into it even deeper.
The recent fiscal cliff talks have consumed the vast majority of the headlines and news bulletins since the re-election of President Obama. A combination of tax hikes and spending cuts that come into effect in 2013 will lead to a significantly reduced deficit but will also (according to CBO estimates) incur a second recession. (1) The measures that would come into effect include the expiration of all of the Bush-era tax cuts (2001 & 2003), the end of tax credits associated with the 2009 stimulus, the end of the payroll tax holiday passed in December 2010, the failure to raise the Alternative Minimum Tax indexed to inflation, causing it to hit the middle-class, the end of many corporate tax breaks, a sequester in government spending, budget caps coming into effect, the implementation of a Clinton-era spending control measure that would cut government payments to doctors drastically and finally the expiration of extended unemployment insurance. (2)
Understanding some of what is included in the fiscal cliff, now the question arises, will we go over it? If you agree with the wider American public then yes: a recent poll shows 51% of Americans think that we will go over the fiscal cliff. (3) A CNN poll found that 67% of those surveyed think that politicians will act like “spoiled children” in the negotiations, representing an even more severe lack of faith in the chances of compromise. (4) On the other hand, you have many experts and participants in the negotiations now predicting that a deal will be reached. For example, over a week ago Obama’s team, including Treasury Secretary Geithner, was predicting that a compromise would be reached. (5) Professor and author Jack Rasmus (who, although he has a degree in political economy and economics and teaches economics, seems to consider corporate America evil organizations that extort their profits from the American people) (6, 7) makes a good argument (despite his typical lack of knowledge or reason) when he points out that a deal will be reached because big business is behind President Obama’s plan for the most part, something that has not been true in any previous deficit or budget showdowns. (6) Many Democrats, including Rep. Jim McDermott and Rep. Xavier Becerra, agree that a compromise will be reached, although perhaps not in time. (8) They point out that Republicans simply need to give in on raising tax rates for the wealthy and then a compromise will be easily achieved, but qualify their statements by pointing out that it will take a lot of time for the measure to make it through both houses with enough votes to pass. Even Goldman Sachs is has now released a report showing that they think that a deal will be reached which includes extensions of tax cuts for middle and lower-class Americans but not the wealthy. (9) So here’s my opinion, and unfortunately for you black-and-white thinkers, I’m not, so neither is my answer. What I think will happen is that a partial deal will be reached which pushes off some of the measures from expiring until a later date and resolves some of the issues (namely the Bush-era tax cuts). Then, having transformed the ‘fiscal cliff’ into a small fall, we’ll end up addressing the rest of the issues after January 1. Think about it, the fiscal cliff was something created by Congress to force themselves to address these issues of the deficit and government spending/taxation. Congress can move it, change it, let it come or any number of things since it’s simply a creation of theirs. Furthermore, as many surveys have shown (3, 4), most American will blame Republicans if we go off the fiscal cliff, which creates a massive incentive for the very people who are holding us back on tax breaks for the wealthy to compromise and let it go through. Additionally, there is widespread (majority) support for higher taxes for the wealthy, and, to cap it all off, the Republicans didn’t even win the richest counties in the US, so why are they fighting for votes they don’t get? (10) So I think, regardless of how it looks, we will not “go off” the fiscal cliff (where all the tax breaks end and all the spending cuts come into play).
Now to address the issue of what the fiscal cliff deal should actually include. I think that first and foremost the deal needs to include the extension of tax cuts for lowers and middle-income Americans, up to $250,000 or $500,000. This would be a really simple way to gain extra revenue while minimizing the damage to the economy. The Congressional Budget Office (who, by the way, it the single most bipartisan body in Washington—they’re literally just a bunch of economist-accountants) has reported that tax cuts are most effective as a stimulus to raise consumer spending for middle and lower class Americans, not upper-income Americans, who tend to spend less of their save money. (11) They have also noted that fewer than 2.5% of small businesses fall under the upper-income tax brackets and that all businesses gain more from increased consumption than they do from a tax break. They state that businesses are unlikely to increase production if they have more money from a tax break but no additional consumer demand. (11)
Next, I think that we need to expand the tax base mostly by removing almost all (or all) tax loopholes, and cutting spending. The fundamental problem with the tax code in the US is that it is too open for special interests to get their say. I’m not talking about the stereotypical image of a special interest as some random unknown group getting tax benefits (although that’s certainly included), I’m talking about you and me. Here’s the issue: whenever you open the tax code up for Representative or Senators to amend it (these issues also apply to subsidies & spending, where it’s known as Pork or Christmas Tree Bills, and to treaties & trade pacts) they’re going to amend it for the interests of their constituents in order to get votes. That’s how the system works, if they don’t do it then they lose the election and someone who will do it is elected in their place. We then demand that we get our exemptions and benefits at the slight cost of everyone else (if the benefits of an activity are more concentrated than its costs, in a democracy that action will end up happening). We would have a great interest in achieving that specific loophole or rebate or whatever, meaning that if it wasn’t included votes would be lost, while nobody cares a whole lot about excluding it from the bill, so no votes will be lost by including it. Of course, when everyone does this is lead to a maze of tax code with all of us suffering because we have to pay the costs for everyone else’s little gimme and the economy suffers from diverting resources from the free market. There was recently an article in the Star Tribune talking about how Senators Franken and Klobuchar have create a resolution/bill to delay price hikes on medical devices that would especially hit Minnesotan companies. Is it in our best interest? Certainly. Is it in the nation’s best interest? Probably not. Will it pass? Probably, because right now Franken & Klobuchar care a whole lot about preventing those price hikes while nobody cares a whole lot about making sure they’re implemented. (By the way, those hikes were part of the Obamacare Healthcare Reform Act Bill thing). (14) Only by repealing the vast majority of tax codes & deductions can we achieve substantial budget gain and help the economy. Unfortunately, this is political suicide so it will never happen under the current system (but I can dream). One politically viable way of doing something in this direction would be to create a rebate limit or cap, similar to what Mitt Romney proposed on the campaign trail. This wouldn’t hurt middle-class Americans because they would still receive all their benefits, but it would limit the benefits given to people who qualify for lots of tax rebates to a certain amount.
Penultimately, spending cuts. I think we could definitely achieve some spending cuts in the same way I described above, but with pet projects and similar programs. Unfortunately that is, again, political suicide, so it’s only in my dreams. One thing we can do is that we can achieve greatly reduced military spending if we move to a more surgical use of our military. We don’t need to be the world’s police, yet we often are. What we should do is draw down forces in areas where they’re unnecessary, commit some portion of the reduction to the UN Peacekeepers, and leave the others out. Then, replace those resource-heavy and low-utility forces with special operations forces, technological advancements and other more modern and lower-cost solutions. For example, the US currently has over 75,000 troops stationed in Japan and South Korea. While I am sure that North Korea may present something of a threat, I think that’s just a little excessive (and most of them are still ‘left over’ from WWII anyways). We also have 47,000 in Germany. (12) Last time I checked, we haven’t been at war with Germany or any of its neighbors since 1945 (the Cold War wasn’t a real war, although it does explain some of that high level). Another way we can cut spending is to allow Medicare to negotiate drug prices the same way Medicaid does. Right now Medicaid gets a great deal from drug companies, who can charge either the lowest price they offer to any private insurance program or 23% lower than their average price. On the other hand, Medicare negotiates drug prices plan-by-plan. The HHS Office of the Inspector General estimates that Medicare get a 19% discount while Medicaid achieves a 45% discount. (15) Changing Medicare to match Medicaid’s system is an easy fix that would be politically viable (since nobody but me understand this stuff anyways). Another change that could save the government a fair amount of money is switching the way inflation is calculated for COLA’s (Cost of Living Adjustments). Right now the government uses the CPI (Consumer Price Index) to adjust Entitlement expenditures, but many studies have show that this probably overstates inflation. Changing to a new measure that the Bureau of Labor Statistic has created called Chained CPI would save about $300 billion, although it would come from decreased entitlement payouts (not popular with Democrats). (13)
As any well-written article will tell you, the fiscal cliff is not something to be messed around with. Our government faces a tough decision in the coming days, and the results from that decision have the potential to reset all progress made thus far by the Obama administration. As one article puts it, Congress has three options for dealing with the fiscal cliff (1). The first is to do nothing. The result is scheduled spending cuts and tax increases taking effect. This option has the possibility to cut the budget deficit by a large margin, but might send the country into a recession (2). Some Washington advisers think this the best option when considering the long run. The second option available to lawmakers is to eliminate the spending cuts and tax increases. The short-term benefits here are undeniable, but the US might end up in a situation similar to Europe's after awhile. The third and final option is to do a combination of the two; let some cuts and taxes go into effect while eliminating others. This middle-of-the-road approach offers modest benefits. As for what I think will happen, the third option is most likely. I would hope that this issue is on the front burner for all politicians, and if they work together in the remaining time, a compromise is still a possibility. It is definitely clear that politicians are struggling to work with each other in the remaining days, as some tense phone calls between Speaker Boehner and the President have evidenced (2). However, if I were a leading politician myself, I think I might take the radical stance of letting America go over the cliff. Our leaders have to think in the long-term. While the initial results might be ugly, the overall cuts in the budget deficit would be worth it. While some Republican leaders may think the cuts could only be enough to "fund the government for a week", I disagree (3). As for what will really with the fiscal cliff, only the New Year's day paper has the answer.
(1) http://bonds.about.com/od/Issues-in-the-News/a/What-Is-The-Fiscal-Cliff.htm
(2)http://www.cnn.com/2012/12/12/politics/fiscal-cliff/index.html
(3) http://dailycaller.com/2012/12/12/mcconnell-on-fiscal-cliff-obama-can-get-tax-hikes-by-doing-nothing-video/
Finally, I think that this budget deal needs to do something to give the economy a slight boost. While it may seem hypocritical to condone additional spending while we’re trying to reduce the deficit, both Republicans and Democrats agree that getting the economy going again would lower federal spending on things like unemployment insurance and would raises revenues from federal taxes. (17) Indeed, as Politico report there are many other things that Democrats and Republicans agree on that could help the economy and alleviate some of these issues. (17) They agree that the tax code should be much simpler (I have already made this point) and that serious entitlement reform needs to happen. They also conclude that the domestic federal budget is way too large, especially on defense. (I have made all of these points) They point out that Medicare will be insolvent in 10 years and that we need to set it on a sustainable track (I’ve already reported many changes that could help this program). Finally, and this is what I have been waiting for, they call for expanded trade—more trade deals—, expanded energy and more immigration. I’ll just point out a few things before concluding. First, opening trade barriers has never been shown to hurt countries. It’s called comparative advantage: when we open up our trade borders we can spend our resources more efficiently and so can they. If you don’t believe me, try reading any economics book written for the average layperson (Naked Economics, by Charles Wheelan, is my personal favorite); they’ll all tell you trade is very very (very very very) good in the long run, and [just] good in the short run. NAFTA, the biggest and most recent trade deal the US has been involved in, has tripled trade within the North American continent, (16) and has positively impacted our GDP (18). Next, expanded energy. yes there would be significant environmental issues with greatly expanding our energy usage. However, we can properly mitigate those effects with a balance of environmental policies like cap-and-trade, turning a negative effect on the environment into and overall positive effect (where the gain in the economy, jobs and other effects greatly outweighs any net effects to the environment). Furthermore, expansions of some of Obama’s green energy programs would help the US become the leader in the exportation of green energy products (like we already are). (19) Green energy will be the future of energy, so why not develop a lead in one of the fastest growing markets in the world? Finally, how to address some of our housing crisis. What would you do if you had millions of homes that could and would be sold at dirt cheap prices if there was demand for it? How could we possibly solve this crisis? I don’t know, perhaps we could let millions of people into the country who want to be here. Immigration policy is just like trade policy: in the long run, the opener the better; in the short run, it can suck for some people. Right now though, life sucks for a lot of people already, but we could greatly reduce our housing dilemma by creating additional demand through (basically) the importation—for free!—of home-buyers. You’ll reduce backlogs at immigration sites, be able to reduce the operating budget of Border Control, create a massive demand in the home market, and make a mini-boom in labor markets as businesses have hundreds of thousands or millions of new customers and potential employees in the labor market within a few months.
In conclusion, I think it’s important to note that I believe that those negotiating this deal will have to be willing to give up some of their points as concessions to meet in the middle. I think that each side should select one or two things that are narrowly tailored and that, if they were included in the final plan, would make deficit reduction feasible, and then keep those while giving up other things to negotiate a middle. For President Obama this means not extending the Bush tax cuts for wealthy Americans, for Democrats this means not raising the medicare retirement age (which would actually increase healthcare expenditures in the country as retirees have to choose expensive private insurance or go without), and for Republicans this could be a switch to the Chained CPI, or it could be cuts in effective tax rates for many Americans, or something else (the issue here is that they haven’t been clear in any of their plans where they intend to achieve their increases in revenue and cuts in spending, so it’s very difficult to tell what they want, besides lower taxes for all, which they’re NOT going to achieve because it’s difficult to lower the deficit and lower taxes without nuking the federal budget.) Regardless, I think that we will not go over the full fiscal cliff, but that some temporary measures will be adopted to forestall it once again while leaders in Washington work out a more complete deal; if I were a leader in Washington I would push for serious tax reform, limitations on pet projects and pork spending, Medicare reform and a change to chained CPI, expansion of trade and immigration and some stimulus spending, especially in energy, to get the economy going; I think that everybody involved in these negotiations needs to pick one thing they want to keep and then compromise everything else to achieve a truly bi-partisan solution.
1. http://www.huffingtonpost.com/2012/11/08/fiscal-cliff-recession_n_2094544.html
2. http://www.washingtonpost.com/blogs/wonkblog/wp/2012/11/27/absolutely-everything-you-need-to-know-about-the-fiscal-cliff-in-one-faq/
3. http://www.people-press.org/2012/11/13/broad-concern-about-fiscal-cliff-consequences/
4. http://politicalticker.blogs.cnn.com/2012/11/26/cnn-poll-two-thirds-say-fiscal-cliff-poses-major-problem/
5. http://news.yahoo.com/video/business-15749628/bold-prediction-on-fiscal-cliff-31256588.html
6. http://prn.fm/2012/12/07/jack-rasmus-predicting-fiscal-cliff-deal-happen/#axzz2EsdBRIVR
7. http://jackrasmus.com/about/
8. http://www.politico.com/story/2012/12/fiscal-cliff-deal-predicted-by-democratic-tax-writers-84855.html
9. http://www.businessinsider.com/goldman-obama-will-win-on-taxes-2012-11
10. http://www.theatlanticwire.com/politics/2012/11/types-people-who-voted-obama/58794/
11. http://www.cbpp.org/cms/index.cfm?fa=view&id=3806
12. http://siadapp.dmdc.osd.mil/personnel/MILITARY/history/hst1209_DMDC.xlsx
13. http://www.washingtonpost.com/blogs/wonkblog/post/a-tax-increase-republicans-might-accept-and-democrats-might-refuse/2011/05/19/AG1R5rhH_blog.html
14. http://www.startribune.com/business/182883681.html?refer=y
15. http://www.washingtonpost.com/blogs/wonkblog/wp/2012/12/03/how-obama-would-cut-medicare-spending-in-a-deficit-deal/
16. http://www.cfr.org/economics/naftas-economic-impact/p15790#p4
17. http://www.politico.com/story/2012/12/crafting-a-boom-economy-84878_Page3.html
18. http://www.washingtonpost.com/wp-dyn/content/article/2008/03/24/AR2008032401562.html
19. http://idealab.talkingpointsmemo.com/2011/08/us-solar-energy-exports-rise-posting-positive-trade-balance-with-china.php
I do not think that Congress will “fall off” the fiscal cliff. We, the people, sent them to Washington to represent our interests. Nobody wins if a deal is not reached by January 1st, 2013. No matter how much each party will blame the other, failing to compromise here with the nation and world watching may destroy their chances for re-election. But what actually happens if we fall of the “fiscal cliff?” (1) Automatic spending cuts would commence on Jan. 2 that will amount to $1.2 trillion in deficit reduction over 10 years. Around $55 billion will be cut in 2013 from projected levels of discretionary defense spending. That translates into at least a 10% cut to every program, project and activity that's not explicitly exempt. Around $55 billion will also be cut from projected levels of domestic discretionary spending, which includes everything from education to food inspections to air travel safety. Budget experts estimate the cuts will result in at least an 8% cut to programs, projects and activities. Income taxes will go on the rise and government unemployment benefits will be cut to 26 weeks.
If I were in Congress, I would push for a short term deal to be reached simply because failing makes us look weak in the eyes of the world; something that we cannot afford right now. I agree with the speaker of the house, John Boehner on the majority of proposals. (2) I agree that an increase in the Medicare eligibility age and a more economical cost-of-living payment for Social Security recipients is needed. I think that taxes on the rich may be increased, but if big businesses are included in that then the economy will suffer. (3) 71% of every tax dollar going to support Medicare, Medicaid, Social Security and interest on the debt. This is way too high. According to a CNN poll, 42% of people polled who disapprove of President Barack Obama's handling of the fiscal cliff negotiations while 49% people polled who disapprove of the way House Speaker John Boehner is handling it. Neither party has a significant lead on the other and this will also be crucial in negotiations.
(1)-http://www.dailyfinance.com/2012/08/06/fiscal-cliff-explained-taxes-spending-congress/
(2)-http://abclocal.go.com/wabc/story?section=news/politics&id=8918700
(3)-http://www.cnn.com/2012/12/12/politics/btn-fiscal-cliff/index.html?iref=allsearch
(4)-http://cnn.com/video/#/video/politics/2012/12/12/tsr-pkg-bash-fiscal-spending.cnn
I think it’s very hard, nearly impossible, to say whether or not Congress will allow the US to drop off the fiscal cliff and into the economic oblivion that could unfold in 2013. Negotiations have gotten nearly nowhere in the past weeks; House Speaker John Boehner has said that the tone of his phone calls and meetings with President Obama have been at best “cordial;” more recently, “deliberate” and “frank (3). Washington has become a battleground for political-stance sounding; someone should really get those people a soapbox to declare their brilliant plans and defame the other parties’. Little headway is being made and most of any talks are being done behind closed doors and partisanship is preventing much, if any, compromise. However, despite all this gloom and doom, I do not think that we will go off the fiscal cliff: the Democrats have the upper hand no matter the initial outcome. If the initiative passes, it will be in their favor; they will get their tax-cut extensions for all but the upper income brackets, because otherwise everyone’s taxes go up, which Republicans are adamantly against. Even if we go over the cliff, the Democrats have the Senate as of Congress’ reconvening in January, with a slight majority in those who say they would vote on the Democratic side (4). So really, it’s a matter of whether Republicans want to lose small now or big in early 2013.
As a leader in Congress, I would be in favor of extending Bush-era tax cuts for the lower and middle income brackets, while letting those on the upper-income brackets expire (causing their taxes to go up a small percentage) and re-approaching the topic of tax increases on other income brackets once the economy has truly recovered. I also think we should make cuts where we can, even if they’re modest: cut from defense what is reasonable and doesn’t horribly disrupt their programs; cut useless committees and programs and the ones that simply drain money; close the existing loopholes. There is no ultimate solution; nothing proposed pleases everyone and fixes everything. However, a look at other options reveals harsh realities. Going over the fiscal cliff poses serious implications: tax hikes for everyone; likely another recession; increased unemployment, possibly up to 9.1% (Goldman Sachs and Levy Economics Institute have predicted worse). However, it would decrease the deficit by $1.2 trillion (2). Congress could also just let tax cuts expire and revisit the issue once they reconvene in January, but some effects will already have taken place (2). Extending all cuts would greatly increase the national budget; something we cannot afford right now, with a debt of $16.3 billion (2). And then there’s the ideal deal, which won’t happen. Nobody even knows what it really is, and with partisan atmosphere in Washington, the likelihood of finding one is close to zero regardless. Largely because the other options are so non-viable, I feel that this is the best path for now.
With the US as it currently stands, we cannot afford to go over the fiscal cliff. The economy and consumer confidence simply would not be able to withstand the harsh consequences, even if, as some say, not all effects come into being at once (1). Ben Bernanke, Chairman of the Federal Reserve, has been quoted as saying that the Fed would be unable to make any impact on these effects, given how gargantuan they would be in comparison to the “policy toolkit” he says the Fed is given (1). Republicans will in no way be able to cut taxes for everyone and leave enough money for the government to operate; Democrats can, likewise, not simply raise taxes without consequences and displeasure to those affected (2). Therefore, I think it largely best to extend the Bush-era tax cuts, while letting them expire for those in upper-income brackets. This way, the government collects approximately $80 billion in additional tax revenue while not hindering the ability of the lower and middle income brackets to spend and subsist on the income that they have (2). It also avoids the possibility of the economy nose-diving back into recession, and circumvents high tax spikes. It does continue to add to the national debt, but not nearly as much as extending all tax cuts; additionally, because the Democratic side of this idea is to find $80 billion in spending cuts somewhere, each party gets part of their ideal plan (2). However, if in any way the cuts are extended, Washington should, ideally, allow them to slowly expire—but not until the economy has recovered considerably. We still live in too great a shadow of the “Great Recession,” and we cannot allow petty governmental grudges and partisanship to plunge us back in.
1. http://www.huffingtonpost.com/2012/12/12/ben-bernanke-fiscal-cliff_n_2287717.html
2. http://www.washingtonpost.com/blogs/wonkblog/wp/2012/11/27/absolutely-everything-you-need-to-know-about-the-fiscal-cliff-in-one-faq/
3. http://www.cnn.com/2012/12/12/politics/fiscal-cliff/index.html
4. http://www.nationaljournal.com/congress-legacy/democrats-declare-checkmate-in-fiscal-cliff-debate-20121213
The good will and cheer of this holiday season seems to be overshadowed by the looming threat of the fiscal cliff. And why wouldn't it? If Congress goes over the cliff, the economy will likely fall into another recession. Unfortunately, I predict that this will be the outcome. Congress has had a long time to work toward resolving this issue, but gridlock due in part to the extreme partisanship in the chambers as well as divided government with the Republican controlled House has prevented any sort of negotiation from occurring. Even with the impeding financial doom, the parties are still having a ridiculously hard time coming to an agreement. Neither side is agreeing to the other's proposals, and President Obama and House Speaker Boehner's meetings have made little headway.
Realistically, if I were a leader in Congress, I'd be a Republican one. And if I were in a position to bargain, well, I'd give some ground to avoid going over the cliff. But not without expecting some in return. I would be willing work on closing loopholes and getting rid of some deductions for the wealthy in order to obtain some additional revenue to prevent another recession. However, that gain by itself (or even raising taxes outright) would not be enough to cover current rate of government spending. Therefore, I would ask that my Democrat colleagues accept entitlement cuts to keep government spending in check. I believe that this proposal would give lawmakers more time to put a permanent solution in place. The issue with the fiscal cliff is that it came during such an unstable economic period. The tax hikes and spending cuts would help to drastically reduce the deficit. The country is in serious trouble if spending continues at rates such as those of 2011, where spending exceeded 24% of GDP. Unfortunately, the economy just isn't currently stable enough to withstand such pressure, and the resulting recession would cause even more financial issues.
The fiscal cliff is the political topic in the United States. Congress and President Obama are in a hotly contested game of chicken to see who will budge first, and the media loves the story. The “fiscal cliff” is the catchy phrase for the upcoming series of tax increases that will begin next year once the Bush tax cuts expire (1). In my opinion, I believe that the two sides will not come to an agreement before the tax cuts expire. My reasoning is that it comes down to congressional Republicans versus the president, and seeing how President Obama was recently re-elected, he is the one who is “holding all the cards.” This means that the Republicans in Congress will have to be the ones who budge and allow the government to increase taxes on the rich, and seeing that, on average, they are cranky, rich people who cannot fathom compromising, as seen by the fact that they continue to refuse to adjust the platform so as to better appeal to the American public and actually have a decent chance of winning in the electoral college, I cannot image that a compromise will be reached by the deadline. This ability to not be able to compromise can be seen in the fact that as a group, the Republicans cannot even come to a consensus on their unified stance on the issue. Add to the fact that, recently, they were quoted to threaten a political war next year with President Obama when it comes time to raise the debt ceiling because of their dislike of the fact that they are losing the battle over higher taxes on the richest members of society, it just keeps painting a better picture for the party (2).
If I were in Congress and a member of the Republican Party, I would advocate for the rich to pay more. Thankfully, both sides seem to agree that this issue is the first step toward a bipartisan effort to solve this issue, considering that Speaker Boehner has consented to this issue (3). However, I would like to raise taxes on the top two percent of Americans, and this is what I would argue specifically for. In order to reach an agreement, this is the biggest factor in the debates, and I would completely agree with the Democrats’ call for this increase (4). Even though my fellow Republicans would probably disown me from the party for advocating this increase from the start, I would respond that the American public wants a deal done – a recent survey of adults in America by Gallup showed that over 70% wanted to see an agreement reached (5). Because this country uses a republican system of government, I would say we have an obligation to get the deal done – otherwise Ben Franklin was right. We could not keep the system the Founders created. Then, I would retort that the election this last November sent a clear message that the party needs to change, and compromise is the first step. The other details can be ironed out in meetings with the president, but a formal voice of approval for some of his plans would definitely get the talks moving. I also support Obama’s use of stimulus spending in the plan on infrastructure, because as seen in the Great Depression, it is an excellent way to get Americans back in the labor force. The income generated by the tax revenue on the rich would be extremely beneficial for the federal government. I believe that another part of the necessary plan is that $1.2 trillion should be the amount proposed to reduce the deficit because the gap between $1.4 trillion and $800 billion is too large. Thus, $1.2 trillion is about in the middle, but is closer to the president’s plan because he has more support from the public (6). Thus, they both have to make sacrifices, with the bulk of it being the Republicans because they have to cave in on the tax increases for the rich otherwise; everyone will see a tax increase. 98% is a very large number, and they should settle for that. Once these issues stated are dealt with, the proposals will just fall into place.
Or, President Obama can just solve everything and get everything he wants by walking to Congress and then leaving while the Republican leaders discuss a strategy. It would be a great media event, and the whole population would support him. Personally, this is the best policy.
1. http://www.washingtonpost.com/business/economy/preparing-for-fiscal-cliff-investors-move-assets-to-avoid-higher-taxes/2012/12/10/748893a4-4088-11e2-bca3-aadc9b7e29c5_story_1.html
2. http://www.cnn.com/2012/12/11/politics/fiscal-cliff/index.html?hpt=hp_inthenews
3. http://www.cnn.com/2012/12/06/politics/fiscal-cliff/?iref=obinsite
4. http://www.cnn.com/2012/12/05/politics/fiscal-cliff/?iref=obinsite
5. http://politicalticker.blogs.cnn.com/2012/12/11/americans-more-eager-for-compromise-on-fiscal-cliff/
6. http://www.cnn.com/2012/12/12/politics/btn-fiscal-cliff/index.html
I believe that congress will get over the fiscal cliff because we have gotten to this point before in the last two years and I think after congress stops procrastinating they will solve it. On December 31st last years temporary payroll cuts and tax breaks for businesses and top earners expire. Both democrats and republicans have ideas to solve it but of course they differ. Going along with how each political party usually solves issues the fiscal cliff is no different. Democrats want to raise revenue by taxing, especially the top 2%, and republicans want to cut the budget. The two faces of the issue are President Obama and Speaker of the House John Boehner. Obama recently lowered his revenue demand from 1.6 trillion to 1.4 trillion but also added changes to the corporate rate to his proposal involving income taxes(2). Whereas Boehner claims that raising tax rates for the wealthy would not resolve the nation’s fiscal crisis and that the real problem lies within the president’s refusal to get “serious” about cutting spending (3). Recent polls show favor towards increasing taxes with 65% agreeing with democrats (1).
If I was a member of congress I would agree with the democrats plan that we should raise revenue with tax increases. I think that the top 2% should pay more and not receive tax breaks which will pump money into the economy. I think both sides will need to compromise a bit in order to successfully solve the problem. If I was a member I would want Obama to lower his revenue demand to make republicans happier with the idea. I would completely avoid raising the Medicare age because I think that would lead to more problems and arguments as well as more spending in the future. Wasteful spending should be cut but no major cuts to the main entitlement programs. I think we will be able to solve the fiscal cliff if congress can negotiate and come up with a compromise that can make both sides happy.
http://www.latimes.com/news/politics/la-pn-fiscal-cliff-democrats-poll-20121213,0,5974227.story
http://www.cnn.com/2012/12/13/politics/fiscal-cliff/index.html
http://www.huffingtonpost.com/2012/12/13/john-boehner-fiscal-cliff_n_2294209.html
"The simplest way to put it is that we're at 24% spending, we're at 16% revenue. We've got to bring those two closer together, and that's how you get a balanced budget, and ultimately that's how you get fiscal responsibility. ... It can be done."
- Tom Daschle, former Democratic Senator (SD) (1)
Tom Daschle seems to me to be one of the only people making real sense on the issue of the Fiscal Cliff. Both parties are prioritizing politics over their constituents, as usual. The Republicans say that the Democrats haven’t been clear about what they want and the Democrats say that the Republicans have failed to even make an effort towards compromise (1). Unsurprisingly, neither statement is perfectly accurate. Congress needs to stop pointing fingers and start focusing on their real options. Speaking of which, here’s my summary of the four options that I see.
1. Leave everything as it is (in other words, go over the fiscal cliff). This would mean indiscriminate cuts in almost all spending and an end to all Bush-era tax cuts, likely resulting in a significant decrease in national debt, but also possibly causing a major stunt in economic growth. Bad option.
2. Follow the Republican platform by making major cuts to all areas except the defense budget and continue Bush tax cuts. Would end or severely limit government programs that are essential to many Americans’ well being, like Medicaid. Would also place more burden on the states to raise revenue to pick up the slack. Bad option.
3. Follow the Democratic platform by leaving spending rates as they are (though perhaps cutting military spending) and ending all Bush tax cuts to help pay for it. Would protect those who depend on the government for basic necessities but ultimately raise everyone’s bill. Bad option,
4. COMPROMISE. Good option, but not feasible until someone actually puts a piece of legislation into play.
Personally, I would choose option 4. There’s a lot of mention of Obama’s plan to fix the fiscal cliff, but (I kid you not) I searched the White House website, Obama’s website, the news and the greater web for the specific wording of the compromise and I swear to you that it doesn’t exist (this video is the closest thing I found (3)). For some reason media keeps reporting on the supposed details of Obama’s plan, but outside generic speeches that repeat campaign promises verbatim, there is no evidence that an actual plan exists.
Anyway, if I were a member of Congress, I would propose a plan that’s remarkably similar to the one that everyone says that Obama supports- remove Bush era tax cuts for people making $250,000 or more (this, by the way, is the only part of the so-called “Obama Compromise” that I actually found evidence of on the White House website (2)). I would also make as many cuts to spending as possible without causing too much of a shock to the economy. I would cut entitlement programs by less than one percent (this would make it clear that entitlement programs will have to be overhauled in the future, but they’re not a priority right now because there’s no way a compromise can be reached on them) and I would cut the military budget to the bare minimum possible to maintain vital forces and a standing military on the assumption that additional military spending could easily be secured if needed. Any governmental program that doesn’t spend all of its money keeping people alive, healthy, educated or safe would get its belt tightened. Essentially, the goal would be to increase tax revenue and decrease spending in roughly equal proportions in as structured, smooth and gradual a way as possible.
As for the real Congress, I think the problem is that they’re biting off more than they can chew as they tackle the fiscal cliff issue. They know that Americans are afraid of the fiscal cliff and that we’re willing to make more compromises than usual on things like entitlement programs because the we feel vulnerable. A lot of Congressmen and women are taking this situation as an opportunity to start thinking about overhauling Medicare and Social Security. Obviously, there’s no way that Congress can reach an agreement on entitlement programs before the end of the year, so they should leave it for another time. Congress needs to focus on tax rates first. Americans can’t do their financial planning for 2013 without an idea of what their taxes are, meaning that many will preemptively reign in spending in order to protect themselves in the event of a tax increase. This reduction in spending has the potential to cause more economic turmoil than entitlement programs and other cuts. In fact, taxes are the only part of the issue that’s really near a crisis. It isn’t vitally important that Congress deal with the rest of the “fiscal cliff” before the new year as long as they decide on taxes. However, I doubt that Congress will see it this way, and as a result, I don’t think a consensus will be reached by the end of the year. I also doubt that a failure to come to an agreement will cause a second recession. It’s most likely that there will be a dip in stock values as Americans are more careful with their spending, but I anticipate a deal being reached in January and I’m confident that the economy will be fine shortly after.
1. http://www.cnn.com/2012/12/13/politics/fiscal-cliff/index.html
2. http://www.whitehouse.gov/blog/2012/11/16/president-obama-meets-leaders-congress
3. http://www.cbsnews.com/video/watch/?id=50134847n
The fiscal cliff is a looming event that takes place on January 1st 2013. It is the date that when the Bush tax cuts to all citizens of the United States will end and, in layman's terms, taxes will go up. As of right now, Democrats control the Senate and the Presidency while Republicans hold the House. Though, Democrats have the power for they are able to deny any bill the House proposes without and a presidential veto and President Obama IS NOT running for re-election so winning the vote of the constituents is not a problem for him.
I think that Congress WILL NOT go over the fiscal cliff. Republicans have made it very clear that they do not want to raise taxes on anyone at all (1), but I feel that they will concede in the end (hurting 2% of all constituents vs hurting all 100%). Republicans, are not in a seat of power. The feat that President Obama pulled off in November shows that people are more in support and agree with Obama than the Republican party. I do not think that Republicans would risk dropping that support level even lower than it already is. Republicans will have to almost concede to everything, if not everything in order to have the slightest chance of obtaining re-election in 2014.
If I were a Republican congressional leader I would accept the terms of the Democrats and avoid the fiscal cliff. The Republicans are already agreeing to many of the Democrats terms such as closing loop holes, increase spending, and eliminating deductions (2). The Republican's largest point is that an increase taxes for the top 2% will affect small business and job creators that declare their profits as their income (2). If it will truly affect small businesses, a major supporter of Democrats, I think that the Republicans should let them "suffer" and reap the rewards in the next 2014/16 elections.
On the other hand, if I were a Democratic congressional leader I would continue with the mentality of "my way or the highway" knowing that although many seats may be up for re-election the public are on our side and trust us more to help the middle class. Letting the Bush Tax cuts expire would not be a good thing, as it would cause a second recession (3). So, by extending the tax cut to the middle class, Democrats can further gain the support of moderate Republicans and carve more into the the Republican base.
1. http://www.forbes.com/sites/mikepatton/2012/12/13/the-fiscal-cliff-who-will-blink-first/
2. http://www.cnn.com/2012/12/13/politics/fiscal-cliff/index.html
3. http://www.telegraph.co.uk/news/worldnews/barackobama/9740918/Barack-Obama-has-the-public-vote-on-fiscal-cliff-say-polls.html
(1)The Fiscal Cliff is a symptom of a condition we in the United States have called deficit spending. The Keynesian Theory of Economics believes in deficit spending to spur the economy during bad economic times and that flawed theory causes things as the Fiscal Cliff. To make the statement "Will Congress go over the fiscal cliff?" is somewhat like asking if the boat sinks while watching the movie "Titanic." We went over that cliff a long time ago, and the two parties are just figuring out how to land and who to blame for the coming dollar collapse. To say you "went over the fiscal cliff" means you can no longer pay your bills with current revenues. Well that being the case, we haven't even payed or debts or bills since 1971 when we defaulted. We just have the Fed print the money, borrow the money, or lend out bonds to other countries at artificially low rates so we don't get stuck with the heavy inflation.(2) This issue has nothing to do with politics in the slightest. The government is only a reflection of the people's apathy. Mostly the fiscal cliff is just cuts in proposed increases in the budget, nothing is actually being "Cut."(3)
If I were a Republican in the house, I'd push for an actual balanced budget, not one that balances in 30 years. We don't have 30 years to balance a budget, other world leaders such as the EU are looking for other opportunities because we don't balance our budget and spend too much money.
First I would return to the gold standard and write an executive order that allows the US treasury to issue silver bonds like JFK tried to do, but LBJ repealed the order before it was put into effect (effectively ending the Federal Reserve Fraud system). This would bring the deficit down to around $800 Billion because silver is worth more than fiat dollars. Assuming we started with a $1.5 Trillion deficit.
I'd then bring ALL of the troops home from everywhere in the world. The Germans are big boys now and can pay for their own military along with the rest of Europe. This reduces the deficit by another 500 billion dollars. That means we have $300 Billion to go. The next $300 billion comes in many small cuts such as redesigning the roll of government to its constitutional place as thought by the founders. If a state wants a welfare or social safety net for example, they can make it and collect taxes for it. Same with all other programs and benefits. Of course the people we have already made promises to will get their money but unless we stop the wars and cut entitlements, we will circle the drain faster and faster.
To conclude, the only things the Republicans and Democrats can agree on are spending more money. This is the wrong solution and to vote for a bill that contains a deficit is insane. You cannot justify destroying the countries economy by saying "well I voted for the lesser of two evils," because that still makes you evil. Finally, the free market system was abandoned in our country in 1913, and hasn't been used since. It created the greatest middle class ever seen, and can return the middle class. Keynesian only make the elites more money and stick us with the bill.
1.http://thefaintofheart.wordpress.com/2012/12/08/keynes-krugman-and-the-fiscal-cliff/
2.http://www.cnbc.com/id/47256715/US_Treasurys_Are_lsquoJunkrsquo_Dollar_Headed_for_Collapse_Schiff
3.http://www.politicalinsidersreport.com/2012/12/06/forward-over-the-fiscal-cliff-the-libertarian-response-2/
http://www.cnn.com/2012/11/06/politics/senate-preview/index.html
http://www.examiner.com/article/breaking-news-ma-conservatives-form-new-coalition
http://www.huffingtonpost.com/2012/12/13/fiscal-cliff-poll-pew_n_2292151.html?utm_hp_ref=mostpopular
I think that congress will go over the fiscal cliff. The Democrats are in a great position right now with Obama not up for re-election and a majority in the senate was won in the 2012 election. They only need to hold out until the Republicans give up their lost battle for no raised taxes. The coalition of the Republicans is breaking and they need to pull together or split apart. They look like criminals in the eyes of the public if they allow the entire country to go into a recession in order to preserve unnecessary tax cuts for the top one percent. Eventually the right wing will cave it’s just a matter of when. If it is after the cliff it could mean the end of the Republican Party as we know it. If I was a Republican I would cave for higher taxes on the rich in exchange for lower taxes on businesses as a tradeoff. It may have the same effect because the same rich could probably find loopholes to funnel private money to prevent it being taxed through their corporations but in the eyes of the general public they look much better. Inserting a loophole that has the same effect in a roundabout way is probably the way to go if their concern really is big money. I think that the president and congress should not give in on raising taxes for the rich but give some tax breaks to businesses to offset it. Prevent any loopholes like the one I mentioned earlier and they have a spick and spam new budget on their hands. Raising the retirement age along with Medi-care to prevent gaps in medical care and keep the current workforce in longer. No one wants it but if people live longer they will have to work longer as well, it’s a mathematical fact. The Democrats will be forced to cave on this issue just like the right can’t preserve tax cuts for the rich. The winds of change are blowing and it’s a hurricane out there.
With January 1st coming quickly, the looming fiscal cliff has become a primary issue of debate in the United States. Because the Bush tax cuts expire at the dawn of the new year, we will fall into this metaphorical economic pitfall and enter a recession if our government fails to make some sort of counter action. Given our present condition of divided government, I think we will go off this treacherous cliff. Talks between Democrats and Republicans in the legislative and executive branches have been described as a “stalemate” in which an agreement has not yet been reached (1). House Speaker John Boehner has encouraged Republicans not to make plans for the holidays because this issue will still be demanding their attention in the coming weeks (2). Furthermore, Boehner and President Obama have met to discuss compromise to no avail (1). Although the Democrats have lowered the amount of revenue they would like to collect from $1.6 trillion to $1.4 trillion, Republicans have remained resilient in their unwillingness to accept a deal (2). Some attribute their bulldog mindset to a need to appease the rest of the Republican caucus, which may view compromise as a sign of weakness (1). I think all these factors add up to create an atmosphere in which preventative legislation will not be passed.
If I was a Democrat in Congress, I would continue to push for compromise. I decrease the amount of expected revenue to 1.3 trillion, but no lower. Additionally, I would advocate more spending cuts, but not necessarily in the areas Republicans would most support. For instance, $69.7 billion can be saved by cutting spending on the Department of Defense for activities entirely unrelated to the defense of the United States of America (3). Among these are Pentagon-operated grocery stores and non-military research projects (3).
If I were a Republican in Congress, I would also strive to reach a middle ground, particularly in the Democrats’ tax proposal. Currently, they are offering to extend the Bush cuts to the lower and middle classes while instituting an increase in taxes on the wealthy (4). I think this proposal is fair and reasonable. In a time of crisis, government needs to generate significant revenue. It appears that the most painless way of doing this is to place the majority of the burden on the smallest percent of the population who can currently handle it (4). While I may not necessarily think this will be the most beneficial solution in the long run, it protects middle class workers and offers a short run solution that will help us temporarily avoid falling off the fiscal cliff.
1. http://www.cbsnews.com/8301-250_162-57559004/obama-boehner-meet-on-fiscal-cliff/
2. http://www.huffingtonpost.com/2012/12/12/fiscal-cliff-holidays-john-boehner_n_2285381.html
3. http://www.policymic.com/articles/19120/fiscal-cliff-2013-here-is-a-solution-to-prevent-68-billion-in-pentagon-spending-cuts
4. http://www.latimes.com/news/politics/la-pn-fiscal-cliff-democrats-poll-20121213,0,5974227.story
1. http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm
2.http://www.housingpredictor.com/2012/biggest-home-price-increase.html
3.http://www.nytimes.com/2012/11/16/us/politics/the-fiscal-cliff-explained.html?pagewanted=all&_r=0
4.http://www.huffingtonpost.com/2012/12/10/fiscal-cliff-talks_n_2269165.html
5.http://www.epi.org/publication/ib338-fiscal-cliff-obstacle-course/
6.http://www.foxnews.com/politics/2012/12/13/boehner-failure-to-get-erious-about-spending-cuts-holding-up-budget-deal/
7. http://www.cnn.com/2012/12/12/opinion/gard-johns-military-spending/index.html
Although it seemed that the U.S. was about to enter a period of strong economic growth, with real GDP increasing at 2.7% from the second quarter of 2012 and the housing market rising for the sixth straight month, the gloom of the fiscal cliff is not only slowing this growth but also threatening to snuff these dreams entirely (1,2). With threats of tax hikes and spending cuts totaling $600 billion, many believe that these sudden changes would be too much too soon and could cause a drastic rise in the unemployment rate from today’s 7.9% to 9.1% (3). Yet, despite these ominous statistics, I do not think that Congress will be able to conjure a deal to deal with the fiscal cliff. The Huffington Post has reported that there is a growing sense of distrust not only between parties but also in the parties (4). Democrats on one side fear that Republicans have a secret agenda of not cutting, but gutting social safety net programs such as Social Security and Medicaid. Republicans on the other hand fear that if they make a deal with Democrats that that the Democrats will not hold up their end of the bargain. As Rep John Fleming of Louisiana said, "The reason we haven't heard Democrat ideas for entitlement reform may be because they have no plans to cut or to reform entitlement spending at all (4)." Further some Republicans think that the Democrats will just sacrifice the future of America just to stick the blame on the Republicans and win political points (4). With the belief that the other side is only looking out for their political self, compromise becomes increasingly difficult and unlikely.
If I was a member of Congress, I would advocate an expiration of the Bush era tax cuts. According to the Economic Policy Institute, extending the Bush Era tax cuts for all, as many Republicans would like to do, will have a large cost to extend but not a large impact (5). In fact, according to the CBO, extending the Bush tax cuts for all will $202 billion while only creating $81 billion in revenues and increasing GDP by 0.5%. Compared to all the other components that will expire, the Bush tax cuts have the highest budgetary impact while leaving a small economic benefit. However, these tax hikes must be accompanied by federal spending cuts in order to ensure that federal spending does not account for 40% of GDP (6). I would cut a portion of the defense spending and raising the Social Security age to 67. Defense needs to be cut because our policies are based on Cold War conditions that are antiquated (7). The money that is cut would help eliminate wasteful spending such as the construction of F-35 joint strike fighter, which cost more to make than was spent on veterans in the last 20 years (7).
First of all, Congress will not tumble over the fiscal cliff because doing so would be bad and no one wants to reelect someone who is bad. Instead, I think Congress will manage to put out a few decisions before this month's end. Eventually the Republicans will have to cave. The nation showed that they supported Obama more than Romney and his ideas and faith in the Republican Party is not high enough to warrant a stubborn fight (1). In the end, Obama has the upper hand: 49% of Americans observe that he is leading the situation better than Boehner (1). If I were a strong leader in Congress, I would argue strongest for a combination movement. Give tax cuts to the bottom 99% AND limit tax deductions. Such a move would be compromise for Republicans and Democrats and be two ways to solve the budget problem (2). Also, as more people are facing unemployment than major health issues, I would argue that unemployment benefits should continue, but it would be okay to drop Obamacare. Maybe if I'm lucky I can cut funding to schools, causing them to have less money to upkeep their buildings. Schools would need to open later and close earlier. I would get more time sleeping after swimming rather than typing blog posts at 11.
(1)http://www.cnn.com/2012/12/12/politics/fiscal-cliff/index.html
(2)http://nationalpriorities.org/en/blog/2012/12/03/what-will-happen-fiscal-cliff/
Much is being said in Washington lately about the ‘fiscal cliff.’ But what exactly is it? Well, it is the colloquial term for when the terms of the budget control act of 2011 will go into effect at the end of this year (1). If the bill is allowed go into effect, it will mean drastic spending cuts, and if the joint committee on deficit reduction cannot figure out a plan, higher taxes (1). The Democrats would like to see a solution containing higher taxes for the richest Americans, while the Republicans (at least most of them) favor an approach consisting of mostly spending cuts. Regardless of who wins, the Democrats should win, not just because of my personal view, but because of the public’s view. In a recent Pew research poll, the Democrats had a clear leg up over the republicans (2). Americans see the left as being the side most likely to compromise, and the side with the most popular ideas. Any solution that favors the middle class and raises taxes for the rich is popular by a very wide margin. In fact, basically anything that hurts the rich is popular. I agree with the demands of the Democrats, but I realize that compromise is necessary. The Democrats will need to agree to some spending cuts, but the American people and I support the tax raises. However, what we need is a solution. Clearly, neither side is willing to budge at the moment (3). That needs to change. We need to put partisanship aside and fix this before it becomes a bigger problem. More importantly, we need a more permanent solution. We will be facing another debt ceiling crisis in the next fiscal year, and if we don’t do something to reduce the deficit, it’s just going to keep growing (4). The government does have more leeway than people think though. Obama is willing to let the debate go past the deadline because he can blame it on the Republicans and the public will agree, and because a remedy can be found even after the deadline has passed (4).
1. http://bonds.about.com/od/Issues-in-the-News/a/What-Is-The-Fiscal-Cliff.htm
2. http://www.npr.org/blogs/thetwo-way/2012/12/13/167159547/on-fiscal-cliff-majority-of-public-sides-with-democrats-pew-poll-says
3. http://www.washingtonpost.com/politics/gop-republicans-dig-in-on-fiscal-cliff-talks/2012/12/13/019a212e-4537-11e2-8061-253bccfc7532_story.html
4. http://www.cfr.org/economics/fiscal-cliff/p28757
I personally don’t think that congress will go over the fiscal cliff. They understand what would occur if they did. For many years congress has been able to continue the government through thick and thin, I feel like they will come up with a compromise to insure the continuation of a government where the citizens don’t go into an uproar due to 7% increases in their taxes and many other things. The fiscal cliff most definitely needs a two-party solution for it to work properly and not be bashed and destroyed by the opposing party. Instead of each side recognizing the other as a threat to their plans for the fiscal cliff one plan must be met and agreed upon. Republicans must understand that for the democrats to fully work with them they need to lessen their strong dependence on the Bush tax cuts. If republicans partially withdraw from the land of lowering the tax rates on income, capital gains, dividends, and estates that they democrats would be more likely to accept parts of their deal. For Democrats they must realize that entitlements on social security, Medicare, and some of the ideals of Obamacare must be relinquished for the Republicans to accept new deals that they would more or less not want. For Republicans to work with Democrats, Democrats need to “withdrawal from the “land” that FDR, Lyndon B. Johnson, and President Obama gained.” (Gross) Luckily for the U.S. the worst that would happen to us if Washington were to fail is that we would get a smaller deficit, a more rational tax system, and needed and likely necessary cuts in a bloated defense budget. Unluckily the unemployment rate would rise to 9% in no time and we would have another possibly bigger recession.
1.Gross, Daniel. Fiscal Cliff Stalemate Needs Two-Party Solution. The Daily Beast Read This Skip That. The Newsweek/Daily Beast Company LLC. 10 Dec, 2012. Web. 12 Dec, 2012.
2. http://www.cnbc.com/id/100311778
3. http://www.huffingtonpost.com/2012/12/14/republicans-fiscal-cliff-plan_n_2297665.html
I believe that we will not go over the fiscal cliff. Boehner and Obama are trying to work something out (1) and I believe they will. It may take time, but as the deadline approaches, the republicans will give in. They don’t want to be blamed for the economic shotgun to the face that would be going over the fiscal cliff. With approximantly 57% of the population ready to blame the republicans, the democrats will defiantly come out on top and this could be a drastic blow to the Republican’s chances for reelection (2). If I was a republican, I would vote for the middle class tax changes, and leave the upper class cuts for January. That way we won’t be blamed, and if enough republicans agree, then we can get it passed. The only reason people are hesitant is the fact that they will be blamed for going over the fiscal cliff. In fact there is a movement in the Republican Party to do this very thing, but it’s not yet the majority. There is only the slightest of chances that we will go over the fiscal cliff, but if we do there will be hell to pay.
1. http://www.cnn.com/2012/12/13/politics/fiscal-cliff/index.html
2. http://www.businessinsider.com/obama-vs-boehner-approval-rating-fiscal-cliff-2012-12
I also don't think that we won't go over the fiscal cliff. As Justin already said Boehner and Obama are getting closer to a deal(1). I think eventually the Republicans will cave because even though they don't want taxes to rise on income levels rise on richer people, they'd rather not see taxes rise on everyone and collapse the economy. If I was a democrat, I would try to push cut budget spending and to increase taxes on the rich, say $500,000 income and above. I think that they definitely should not let the bill end, as that would increase taxes on all of us and eventually put us in a recession(2). I think that they should either cut budget spending as much as possible and/or increase taxes on the very rich.
1) http://www.washingtonpost.com/blogs/wonkblog/wp/2012/12/17/a-fiscal-cliff-deal-is-near-here-are-the-details/
2) http://www.washingtonpost.com/blogs/wonkblog/wp/2012/12/17/a-fiscal-cliff-deal-is-near-here-are-the-details/
The fiscal cliff is a fear driving many Americans, not only in the government but in the average household. Personally I don’t think that we will be diving down a cliff as the metaphor states, even if legislators are unable to compromise. The confluence of items that will come to a head on January 1st will not necessarily mean catastrophic failure [1] The tax increases, although significant aren’t going to automatically kick people out of house and home, and the budget cuts will not be felt for a little while at least.
If I was in congress I would push for increasing the marginal tax rate for americans who make over 600,000 dollars a year. This number is in between Boehner and Obama’s numbers so it seems that it would be a logical meeting place for the two parties to make a compromise. [2] This will greatly increase available money for the Government, as well as not put a burden on those who are impoverished. I would also push for raising the debt ceiling as Bohener suggests [3] I would push for these things because they will increase the revenues of the government so that money can be spent where it is needed. I also believe that this is the best solution to the problem that we currently face. It will allow the government to borrow more without incurring much crowding out, but will also increase tax revenues without impacting the upper middle income bracket.
[1] http://www.washingtonpost.com/blogs/wonkblog/wp/2012/11/27/absolutely-everything-you-need-to-know-about-the-fiscal-cliff-in-one-faq/
[2]http://www.cnn.com/2012/12/17/politics/fiscal-cliff/index.html
[3]http://www.cnn.com/2012/12/15/politics/fiscal-cliff/index.html
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