Pushed over the edge?

[hobbsyoyo]

(and you thought this was going to be about my usual drama-filled antics )

So, we (the US) are about to go over the fiscal cliff. That means that in January, if a budget deal is not reached that there will be massive, across the board spending cuts and tax hikes.

The president has offered a hardball deal that is (IIRC) 4:1 with tax hikes (mostly on the rich) to spending cuts. This is a reversal from last year when he offered something like 1:2, which the Republicans rejected.

With the election won and a clear mandate to raise taxes on the rich, the President feels comfortable starting his negotiations from this extreme position. But the Republicans are standing firm on their insistence that tax rates should be lowered for most people while closing tax loopholes that will supposedly only affect the rich.

There does not seem to be any real chance of compromise and Obama has insisted that we will go over the cliff if the Republicans don't sign off on higher taxes for the rich.

Time is running out. Are we going to go over the edge? What are your thoughts on the situation?

 

[downtown]

I think it is pretty unlikely that we're going to go over the cliff, given the potential to push a teetering recovery back into recession, and the fact that polling suggests that Republicans would overwhelmingly be blamed for it. Statesments from Boehner, McConnell that suggest otherwise is gamesmanship to keep them from losing too much political face.

I think it is pretty clear that there is a political mandate to raise tax rates on the wealthiest. The public wants it, our tax rates historically low, and any deficit reduction plan that doesn't include this is reckless or mathematically inaccurate. If Republican House leaders want to make this the hill they die on, great. It will be only to their own political ruination.

The questions, I suppose, are whether a simple deal gets done now (extend Bush cuts to everybody except those who make 250,000+), and punt the entitlement details until the next debt ceiling fight in a few months, or if leaders will actually create a framework to clash Medicare and Defense spending enough to let the government function.

I hope it's a big deal. Constant fights over the debt ceiling will do far more damage to our credit rating than spending alone.

 

[hobbsyoyo]

I agree with you on all counts and do hope for a big deal.

I am afraid however, that there are enough teahadists to derail any deal they don't like. I am also not sure that Boehner will ever agree to a tax hike deal or that enough Republican senators will sign off. I am beginning to think their stance is inflexible to the point they will gleefully derail a recovery to preserve low taxes on the rich.

 

[ace99]

*** A deal is in sight -- the question is how big: We said this yesterday, and we’ll say it again: Everything out there suggests that Washington isn’t going off the cliff. The Washington Post reports that Republican centrists and even some conservatives are calling on House Speaker Boehner “to concede on rates now, while he still has some leverage to demand something in return.” And the New York Times observes that Boehner has more support from his rank-and-file than ever before, which gives him more flexibility to cut a deal. So perhaps some of our media brethren should stop with the sky-is-falling headlines. But here’s the big question: Can Washington get a large deal? One option to avoid the fiscal cliff is to simply extend the Bush-era tax cuts for income below $250,000 and punt the rest of the fight until next year, which would produce another political stalemate and a potential battle over raising the debt ceiling. The other option is to construct a big deal to take care of everything now (or at least create the framework for getting it done). The first option is the easy way out, but it only postpones the fight. The second option is harder, but it’s also the opportunity for a legacy. Which option will President Obama and congressional Republicans ultimately pursue? That’s what the next two weeks are about. One thing the next two weeks are NOT about is going over the cliff. If no big deal is achieved, then there will be a middle-class tax rate extension bill passed that allows rates on the top 2% to go up either to 37% or to 39%.

http://firstread.nbcnews.com/_news/...deal-is-in-sight-the-question-is-how-big?lite

 

[hobbsyoyo]

I would love to believe that ace99. I just don't know...

 

[ace99]

We're all going to die December 21st anyway.

 

[hobbsyoyo]

Please, I will be dead from an ACW dead babies derail-induced aneurysm long before that.

 

[downtown]

Yeah, some pretty conservative legislators, like Tom Coburn, have already said they'd be flexible on increasing rates in exchange for specific spending cuts. The teacrazy wing of the GOP is going to complain about any deal, because they don't understand the concept of leverage, but Boehner, for all of his flaws, isn't one of those people.

 

[hobbsyoyo]

But without the teahadist wing, can Boehner deliver?

I am pretty sure Coburn said a day or 2 ago he wouldn't vote for a rate hike?

 

[Murky]

We're all going to die December 21st anyway.

Don't get your hopes up. I wouldn't borrow a lot of money from a loan shark or anything.

 

[downtown]

But without the teahadist wing, can Boehner deliver?

I am pretty sure Coburn said a day or 2 ago he wouldn't vote for a rate hike?

Well, the article Ace just published indicates that Boehner is in a stronger position re: Republican caucus then he's had in a while.

As for Coburn: http://www.latimes.com/news/politics/la-pn-coburn-tax-hikes-fiscal-cliff-20121205,0,7451533.story

Republican Sen. Tom Coburn said Wednesday that he would prefer the government raise more revenue by hiking tax rates, rather than by limiting deductions — a stance that departs from Republican leadership in the fiscal cliff negotiations.

"Personally, I know we have to raise revenue; I don't really care which way we do it," Coburn said, appearing on MSNBC’s “Morning Joe.” "Actually, I would rather see the rates go up than do it the other way, because it gives us greater chance to reform the tax code and broaden the base in the future."

 

[hobbsyoyo]

I stand corrected. Thanks downtown.

 

[Peck of Arabia]

As far as I can tell, the Democrats can take as strong a stance as they like, the "fiscal cliff" will bring in tax hikes to spending cuts at a ratio of about 3:1 (hike:cut) I believe. Given that this is largely what they want, and the Republicans will be blamed if it happens they have every reason to stand their ground.

As to the risk of sliding back into recession? I'd take it as one of those "short term pain long term gains" kind of thing. After a couple of quarters there should be a strong recovery, well, so Howard Dean says

 

[hobbsyoyo]

We should be in a stronger recovery already, but business leaders are hording cash due to all the 'uncertainty' (re: we want our tax cuts!!!). Going over the cliff will only cause more 'uncertainty' and I think make it more unlikely that they'll let go of their fat stacks of cash.

 

[downtown]

We should be in a stronger recovery already, but business leaders are hording cash due to all the 'uncertainty' (re: we want our tax cuts!!!).

I don't think it's as much uncertainty re: taxes as it is weak consumer demand.

 

[hobbsyoyo]

I don't think it's as much uncertainty re: taxes as it is weak consumer demand.

Consumer demand has been decent and is picking up. Though I don't have any quotes to offer you, I have heard many a business leader spout off about the uncertainty surrounding the regulatory climate and taxes and not so much about weak consumer demand. Though you can dismiss this anecdote as such since I can't back it up and don't have time to dig up quotes this second.

 

[Chiteng]

(and you thought this was going to be about my usual drama-filled antics )

So, we (the US) are about to go over the fiscal cliff. That means that in January, if a budget deal is not reached that there will be massive, across the board spending cuts and tax hikes.

The president has offered a hardball deal that is (IIRC) 4:1 with tax hikes (mostly on the rich) to spending cuts. This is a reversal from last year when he offered something like 1:2, which the Republicans rejected.

With the election won and a clear mandate to raise taxes on the rich, the President feels comfortable starting his negotiations from this extreme position. But the Republicans are standing firm on their insistence that tax rates should be lowered for most people while closing tax loopholes that will supposedly only affect the rich.

There does not seem to be any real chance of compromise and Obama has insisted that we will go over the cliff if the Republicans don't sign off on higher taxes for the rich.

Time is running out. Are we going to go over the edge? What are your thoughts on the situation?

Obama knows the Republicans wont cave. He doesnt care.
He thinks he can win.

We shall see

 

[Cutlass]

Consumer demand has been decent and is picking up. Though I don't have any quotes to offer you, I have heard many a business leader spout off about the uncertainty surrounding the regulatory climate and taxes and not so much about weak consumer demand. Though you can dismiss this anecdote as such since I can't back it up and don't have time to dig up quotes this second.

That's called "rent seeking behavior". It isn't taxes and regulations that in any way cause the uncertainty. And they are well aware of that. But they are also well aware that if they can convince enough people that it is, then they can get more welfare for themselves at the expense of the middle class.

If you gave them literally everything they ask for they would not increase investment. Bush tried that. The result was that investment tanked.

 

[Core Imposter]

All they ever do in Washington is punt. They will trade space for time and place their faith the in old Keynes principal that we are all dead in the long run anyway.

 

[hobbsyoyo]

That's called "rent seeking behavior". It isn't taxes and regulations that in any way cause the uncertainty. And they are well aware of that. But they are also well aware that if they can convince enough people that it is, then they can get more welfare for themselves at the expense of the middle class.

If you gave them literally everything they ask for they would not increase investment. Bush tried that. The result was that investment tanked.

Yeah, that's pretty much what I've felt is going on. It's disgusting and I also feel (totally unsubstantiated) that they were also witholding their cash stash to increase the chance that Romney would get elected by keeping unemployment higher than it should be.