Fiscal cliff

[Edward Campbell]

I'm inclined to agree with ModlrMike. Medical insurance - which is what US Medicare and Canada's health care plans are, really, all about - and ALL social programmes/entitlements ought to be "means tested:" those who can afford to pay a lot, those who can not afford anything pay nothing - most of us fall somewhere in the big, wide middle. That's what Saint Tommy Douglas had in mind back around 1960.

 

[Brad Sallows]

The public have spoken they want a Republican House of Representatives, doesn't matter how much you or I may or may not agree with democrats.  It's a democracy, Majority voted for a Republican House.

The House is where taxation and spending authorization originates.  Democrats are winning the public relations war by misleading people too ill-informed or too partisan to think objectively that the Republicans are "stubborn"; but exhibit A in the Hall of Stubborn is Obama, who has fervently shackled himself to a taxation measure which not only is mathematically a metaphorical drop in the bucket, but is also one he has conceded is about "fairness" to which he will not or can not attach a hard number.  What is the exact taxation rate of "fair"?  That sticking point is what is holding everything up - his obsession that someone, somewhere, is making "more than enough money".  He is combative and inflexible, both of which are bad attributes in an executive.

Canada's operating balance was in surplus from 1987-88 through 08-09 inclusive - see the Fiscal Tables.  Debt was the near cause of ruin once; it can be the cause of ruin again.  The US now, unlike Canada then, has none of the same conditions (freedom of manoeuvre) for successful resolution of the problem: operating surplus, two major parties committed to spending control and debt reduction, unity of effort in the legislative/executive branches, high costs of debt gradually evolving to low costs of debt, large trading partner combined with FTA and weak currency.  They have prospects for tax reform (ours was the GST), but see again "unity of effort".

 

[a_majoor]

While a few high profile millionaires are advocating for higher taxes, it is interesting to see the actual behaviour of millionaires in practice.

In US States that instituted millionaire taxes, millionaires rapidly reorganized their fiscal affairs to stop being millionaires or packed their bags, leaving these States with lower tax revenues than before. This isn't unique to the US, raising tax rates in the UK and France has triggered the same behaviour and fiscal results there as well.

Even the ones who are part of the Democrat PR team are quite suspect; a few examples include John Kerry docking his yacht in Delaware to avoid higher taxes in Mass;  Jeffrey R. Immelt ensuring GE pays no US taxes while acting as a shrill for President Obama's economic policies or the very telling observation that Warren Buffet or other advocates of higher taxes refusing to write a cheque to the US Treasury department.

Why don't they put their money where their mouths are? Once you determine that, you will understand the true motivations behind the movement to increase taxes.

 

[Fishbone Jones]

And like Belgium, I'm sure we'd be more than happy to have all those disenfranchised US millionaires living in our border cities spending their money here instead. :nod:

 

[Brad Sallows]

I'd be happier if we could find some disenchanted Belgians to live here and make beer.

 

[GAP]

And like Belgium, I'm sure we'd be more than happy to have all those disenfranchised US millionaires living in our border cities spending their money here instead. :nod:

I don't see the US millionaires moving to rural border cities to avoid the taxes....the US requires all US citizens to file a US tax return each year, irrespective of where they are living.....ask the US cum Canadian citizens who are being asked to file 10, 15 sometimes 20 years of taxes...

 

[Old Sweat]

The Duffle Blog joins the debate with some bitter satire. It is reproduced under the Fair Dealing provision of the Copyright Act.


US Army Awarded Medal Of Honor After Jumping On Fiscal Grenade

1,529  |  27 December 2012  |  by Dirk Diggler

THE PENTAGON – President Obama announced today that he would be awarding the Medal of Honor to the US Army for its “great sacrifice and courage in the face of a fiscal disaster,” according to an official statement.

This week, the US Army joined many past recipients of the nation’s highest award for bravery by jumping on a fiscal grenade, and having its budget blown apart.

A decade of protracted war, tax cuts, and reckless entitlement spending placed the US government on the precipice of a dreaded “fiscal cliff”. With lawmakers facing the challenge of cutting $1.2 trillion from the budget over the next ten years, it could have forced Americans to swallow a series of automatic tax increases and cuts to entitlement spending.

This would have forced the average American to make immense sacrifices in order to tackle the nation’s ever-mounting debt. Fortunately, the US Army leapt on the impending fiscal grenade, sparing Americans from the horror of sacrificing for the well-being of the nation.

But in doing so, the Army paid a heavy price: it was forced to accept massive budget cuts, and reduce the size of the Active-Duty Army to 430,000 soldiers. By fiscal year 2015, over 140,000 soldiers will be looking for a new line of work.

Nevertheless, the US Army’s noble sacrifice prevented Congress from having to reach an agreement, after months of heated talks.

Choking back crocodile tears, Senator John Kerry (D-MA) was grateful for the Army commitment to service.

“The US Army has tirelessly borne the brunt of war over the past decade,” said Kerry, “so if there’s anyone who has plenty of experience in the whole sacrifice department, it’s definitely them.”

Senator Kerry went on to thank the Army for its selfless service, but added, “It’s just, well, for 140,000 of you, your services are no longer required.” Kerry was unavailable for further comment, as he was preparing to spend New Year’s Eve at his mansion in the Cayman Islands, on which he pays no taxes.

The US Army’s heroic actions spared Americans from almost certain inconvenience. Americans can enjoy the gift of life, made even sweeter due to the fact that they now pay less in taxes than they did during the 1980s, and certainly less than nearly every industrialized country in the world.

“Let us not forget this day,” said House Speaker John Boehner, after the award was announced. “These heroics will always be remembered, until we screw up something else of course. The US Army gave up its budget so that others may live, off the government’s dime.”

The US Army’s actions not only saved everyday Americans the burden of higher taxes and cuts to popular government programs, but it also saved the lives of millions of defense programs.

General Mark A. Welsh III, Chief of Staff of the Air Force, released a statement saying, “Thanks to the US Army’s heroic sacrifice, we were able to buy three additional F-22 Raptors.”

“Never before have so many sacrificed for so little,” he added.

http://www.duffelblog.com/2012/12/us-army-awarded-medal-of-honor-after-jumping-on-fiscal-grenade/?utm_source=The+Duffel+Blog+Email+Newsletter&utm_campaign=e5b3ceaa9e-RSS_EMAIL_CAMPAIGN&utm_medium=email

 

[Edward Campbell]

This "fiscal cliff" issue might be President Obama's chance to repeat Roosevelt and Truman's 20 year dominance of US politics (1933-1952) when the Democrats were able to practice "retail politics" at its best (or worst, depending upon one's economic inclination) and make the GOP nearly irrelevant in US public life.

Additionally, perhaps he honestly feels that:

1. Increased revenue is the best way, politically best way in any event, to address the US deficit nightmare; and

2. US defence spending is out of control.

Assuming the convergence of that 'opportunity' and those leanings then maybe the pain - and there will be real, measurable, albeit short term pain - is a small price to pay for a decade or two during which Democrats can reshape America into something like France.

 

[Brad Sallows]

France's unemployment rate is also typically higher than that of the US.  I'm not sure how many hundreds of thousands of additional stressed and broken families that means are likely to be created in the US, but I'm sure it is a small price to pay for the progressive intelligentsia to feel a little bit better about itself.

 

[krustyrl]

This area of discussion is mostly out of my league but can someone tell me some possible impacts it may have on Canada and Canadians should the Fiscal Cliff be reached and fallen over.? 

 

[Edward Campbell]

This area of discussion is mostly out of my league but can someone tell me some possible impacts it may have on Canada and Canadians should the Fiscal Cliff be reached and fallen over.?

We sell a lot - good and services - to the USA, more that just oil. If the American economy goes back into recession - three successive quarters (nine months) of "negative growth,' which is a very real possibility, then they, American business, home builders and consumers will stop buying what we sell and we, Canadian businesses and workers, will lose markets and jobs. Will we, too, be pushed back into recession? Maybe, but more likely we will have one or two quarters of "negative growth" and then more slow growth.

 

[krustyrl]

Thank you ER for the insight.  My speculation wasn't too far off. 

 

[tomahawk6]

The US economy never recovered from the recession. Real unemployment numbers are double what they were under Bush. Obama ran up over $6 trillion in debt in his first term and now he is faced with the prospect of not being able to replicate that. He wants to go over the fiscal cliff because he believes that an economic collapse will set the stage for a communist USA.He wants to transform our country and he thinks going over the cliff will do that and he will blame the Republicans. Obama is clearly expecting the Republicans to cave. I hope they stick to their conservative beliefs or get a new Speaker in Jan.

 

[Brad Sallows]

He wants to transform the country, but I doubt to that extreme.  Democrats face the discouraging fact that the "temporary" measures undertaken to "successfully prevent a depression" are barely holding the economy in a state of weak growth.  Policies undertaken so far have failed to restore economic activity so that federal revenues climb back up to where they should be (following pre-2008 trend), and have also militated against growth and recovery (eg. misallocation of capital in the ARRA, costs of PPACA).

A logical plan (for Democrats) is to first seek higher tax rates, and then eliminate tax shelters and expenditures.  However, I see that they are now talking about permanently extending current rates for "non-rich" income levels.  I expected at some point they would realize they burned through all their fiscal freedom-of-manoeuvre in the past recession.  They have been able to play the "you propose a fix for the problem we created, subject to our demands" blame game with Republicans, but that time is at an end with the recent demonstration of where the floor of negotiations lies.  So: how do you remove "temporary" measures without slipping into recession, if the "temporary" measures are necessary simply to hold the economy where it is, let alone boost it to prior performance?

 

[tomahawk6]

Boehner offered $800b in new revenue and the President turned him down.

 

[cupper]

He wants to go over the fiscal cliff because he believes that an economic collapse will set the stage for a communist USA.

Channeling your inner McCarthy I see. Jenny would be so proud! ;D

 

[cupper]

Boehner is never going to get anything passed by his own conservative group that would pass in the Senate. They are too focused on keeping the locals calm so they don't face a primary challenge in the mid terms against a more conservative candidate.

And the likelyhood of something getting through the Senate for the House will depend on McConnell allowing it to move without a fillibuster. Slim to none, and slim is heading toward the door.

Everyone in Congress seems to be pushing as hard as they can to go over the cliff, as it suits their own agendas. GOP gets to reset the game by claiming that they are cutting taxes after the rates go up. Dems get the rates up on the top 2% or whatever while moving the rates back for the middle class (even if they only go back a a percentage point). The cuts can be reduced or reworked to be more planned and reasonable, and all the othe rshort term pain can be resolved retroactively.

BUT... it never had to get to this point if everyone would have just STFU, sat down and NEGOTIATED like they used to when we had more moderate members in both the House and Senate who could bargain with the opposition, as it should always be, give and take.

Want to cut the deficit and the Debt, fire Congress. They are the problem. And are definitely not the solution.

 

[cupper]

Now where did they hide my meds?

 

[Fishbone Jones]

Now where did they hide my meds?

Probably in the same closet as your tinfoil hat

 

[a_majoor]

No spending cuts and a relative pittance of new income (until those being fleeced rearrange their affairs). Many, greater, cliffs lie ahead, especially the ones where Social Security, Medicare and Medicaide slip into net deficit (projections vary, but it could happen as early as 2016).

The best possible result may have been to stop negotiating and go over the cliff; real spending cuts would have been enacted (bringing America's Debt to GDP ratio down in the medium term), the TEA Party movement would have achieved their goal of reducing the size and scope of government (quite possibly the true reason the Democrats refuse to make any meaningful concessions or cuts; this is the only way they can thwart the TEA Partiers) and there would have been precedent to make meaningful reforms to so called entitlement programs.

Edit to add:

Since the Dems live in a static world and do not consider that people are active agents, they will get a nasty surprise when tax revenues are far lower in 2013 than expected (or even decrease, the same way that the UK's tax revenues decreased after their tax hikes). This is just one of the many plays we can expect to see:

http://www.thefiscaltimes.com/Articles/2013/01/04/For-High-Income-Earners-Time-for-a-Tax-Divorce.aspx#page1

For High Income Earners, Time for a ‘Tax’ Divorce

By JACQUELINE LEO, The Fiscal Times
January 4, 2013
Click the Huffington Post’s “divorce channel” (yes, they have one) and you’ll see a typical women’s magazine story about the 10 signs you’re headed for a divorce.  You’ve heard it all before:

• Forget being on the same page, you're not even on the same book.
• You’ve outgrown her
• He doesn’t fulfill your needs
• You’re staying together because of the kids
• Blah, Blah, Blah

Of all the known reasons for getting a divorce, we bet you never heard this one before. You both make too much money to stay together!  Sounds ridiculous, right? But the new fiscal cliff tax law that saved 99 percent of the country from massive tax hikes made a beeline for love-struck yuppies.
Meet the new George and Martha—two investment bankers who fell in love over a bottle of Barolo while students at Wharton. They were made for each other:  they had the looks, the lifestyle, and the resumes that Wall Street firms bid for.

As their earnings and bonuses increased, they bought a 2,000-square ft. apartment in the heart of New York’s Tribeca. This was a paint-by-numbers picture: designer clothes, Hamptons weekends, movie premieres, and trips to exotic places. Before long they were each making about $400,000 a year. And, thanks to the Bush-era tax cuts, they were able to keep a lot of that money and live the high life.

That was before the tax deal that would save the country from recession and make George and Martha a bullet point on “signs you may be heading for divorce.” The new law raises taxes on couples making more than $450,000 and individuals making more than $400,000. When their accountant told them they may have to limit their deductions because of their joint incomes as well, they asked her to run the numbers and come up with an alternative.

At their next meeting, she presented them with two options—file as a married couple and pay the piper, or divorce and file as “single.” As it turns out, George and Martha would save over $27,000 a year if they divorced. And so they did. But they’re still together, in some ways closer than ever.
They started their own business geared to couples like them called “MisMatch.com.” They analyze people’s taxes based on marital status, types of investments, etc., and try to save people a bundle. George and Martha’s next step—design new software to compete with the big tax programs for people at all levels of the tax code….and be able to change it on a dime.

The Fiscal Times worked with a new tool from the Tax Foundation. My Tax Burden  is an easy-to-use calculator that has been updated to help taxpayers get an idea of where they stand with the Internal Revenue Service for 2012 and 2013.

Read more at http://www.thefiscaltimes.com/Articles/2013/01/04/For-High-Income-Earners-Time-for-a-Tax-Divorce.aspx#Dz6fj20EZdKb9Y1b.99