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Here Comes The Fiscal Cliff  
User currently offlineKen777 From United States of America, joined Mar 2004, 8278 posts, RR: 8
Posted (1 year 9 months 3 weeks 6 days 11 hours ago) and read 2205 times:

I keep waiting for someone to fire this thread up.  

Hasn't happened so I thought I'd give it a go. Especially since we are now at about 36 days before this cliff, or slope actually starts.

First, the prime issue appears to be tax rates, but there are a lot of changes that will also happen. The big 3 after tax rates IMO are:

- The Capital Gains Tax goes to Pre-Bush levels

- The Estate Tax goes to Pre-Bush levels

- The $1,000 per child per year GOP Socialist Handout is cut in half

Politically this is an interesting time for both parties. On the GOP side there are actually Republicans talking about defaulting on the Norqist Pledge to not raise taxes. Ever. Of course on January 1st the issue will be about what taxes are going to be lowered, not increased.

We also have the question about sequestering and the need to take some action that will address this issue.

So, what are your bets & preferences?

I'll start off with my bet that an agreement will not be achieved before the end of the year. There will be effective discussions that will be helpful in the new year - especially in terms of moving quickly when Congress comes back.

I alos don't see a huge overnight reaction on the economy. I'll go with the belief that it will be more like a slope, with time available to make some agreements without the urgency we face right now.

17 replies: All unread, jump to last
 
User currently offlineDeltaMD90 From United States of America, joined Apr 2008, 7908 posts, RR: 51
Reply 1, posted (1 year 9 months 3 weeks 6 days 11 hours ago) and read 2188 times:

Quoting Ken777 (Thread starter):
I keep waiting for someone to fire this thread up.  
Now, Time To Face The "Fiscal Cliff"! (by Revelation Nov 7 2012 in Non Aviation)


Honestly, I'm 90% sure we won't "go over." When you have Boehner of all people speaking of compromise you know we've gotta be close. I will only take a few Republicans to "defect" (compromise) to give the Democrats a clear path to some compromise.

Then again, the military stopped getting paid for about 3 days or so. Not saying nothing drastic won't happen... still doubt it



Ironically I have never flown a Delta MD-90 :)
User currently offlinePu From Sweden, joined Dec 2011, 697 posts, RR: 13
Reply 2, posted (1 year 9 months 3 weeks 6 days 11 hours ago) and read 2176 times:

My feeling is some significant portion of Republicans either a) are actually more concerned about doing something reasonable versus sticking to ideology, OR, b) are in safe enough seats that they can take some risks.

SO, I expect the middle class tax cuts will stay, estate and cap gains taxes will go up, BUT

defense spending and "entitlements" will get some cuts



Pu


User currently offlineDeltaMD90 From United States of America, joined Apr 2008, 7908 posts, RR: 51
Reply 3, posted (1 year 9 months 3 weeks 6 days 10 hours ago) and read 2156 times:

Quoting Pu (Reply 2):
defense spending

We can only hope, I just hope that they are smart about it. I'm all for cuts, but if they do these cuts unwisely I'm pretty much screwed and out of a job. But job or no job, I hope America can get back on its feet.

Again, I see both sides agreeing to a compromise. I could have some bias, but I think I remember the Democrats agreeing to some compromise a while back but it seems that the GOP has been less flexible. Correct me if I'm wrong, but if I'm right wing-leaning and think this, you can only imagine what moderates think (probably didn't help too much on Nov 6th either)



Ironically I have never flown a Delta MD-90 :)
User currently offlineDreadnought From United States of America, joined Feb 2008, 8841 posts, RR: 24
Reply 4, posted (1 year 9 months 3 weeks 6 days 9 hours ago) and read 2151 times:

I have no problem with repealing the Bush tax cuts. ALL of them. Not just a few of them on those who are political enemies or small enough to be politically safe/popular to beat up on.

Dems said they were primarily tax cuts on the rich. Fine. Then repealing them will be primarily a tax increase on the rich. Anything else will simply prove they were lying the past 10 years.

The CBO has indicated that Obama's plan - repealing the tax cuts only on the rich, and then increasing them up to between 41 to 44% due to the Obamacare taxes and a couple of other things - will only produce around $80 billion per year of additional revenue (assuming that there is no economic impact). The deficit is over a trillion, and is expected to remain over a trillion for the forseeable future.

Taxing the rich will not have any significant impact on the deficit. Eliminating ALL of the Bush Tax Cuts, however, is estimated by the CBO to produce well over $300 billion per year. Now we are starting to make a dent.

But in order to get the deficit down to a manageable level (like 2-3% of GDP), In addition to eliminating ALL of the tax cuts, we will still have to find some 400 billion or so in savings elsewhere.

http://nationalpriorities.org/media/uploads/publications/presidents_budget_fy2013/chart_3.jpg

Where are we going to take it from?

Oh, by the way - the 7% that goes to interest... I found out something interesting recently. Traditionally, the Department of Treasury issues T-Bills and Notes to cover the deficit in a wide range of validities - from one month to 30 years. Obviously the government will pay a higher rate for a 30 year loan than for a short term loan. Issuing a spread allows the government to guard against risk of inflation. But in the past few years, nearly all the issues have been in short term bonds, in order to keep the interest expense low. They just roll it over - at a rate of some $5-7 trillion per year. But the day interest rates start going up we are toast.

Right now, interest rates are being held at rock bottom rates artificially. The Federal Reserve is buying up a big chunk of the issues. The reason for this is that the offered interest rate is not good enough to attract investors. One of these days, the Fed is going to say 'no more'. At which point the Treasury will have to start offering serious interest rates, like 4, 5, 6%.



So what happens when those interest rates start rising? In the very first year, refinancing $6 trillion to the rates they were at during the Clinton or Bush II years (which I think would be conservative) would cost an additional $300 billion. The following year you would see the bulk of the the rest having to be refinanced - call that another $300 billion.

Which would mean that after only 2 years of interest rates starting to creep up, we risk having interest expense quadruple. It will be more than military spending and more than Medicare/Medicaid.

The "fiscal cliff" everyone is talking about - that's nothing. A little bad PR, but 90% of Americans won't even notice any difference. The real fiscal cliff is coming in another couple of years, when the treasury starts having to raise interest rates.



Veni Vidi Castratavi Illegitimos
User currently offlinerfields5421 From United States of America, joined Jul 2007, 7607 posts, RR: 31
Reply 5, posted (1 year 9 months 3 weeks 6 days 9 hours ago) and read 2145 times:

All the people in Congress know that allowing the 'Fiscal Cliff' to hit - especially the tax increase side, but also the spending cuts

will result in the largest turnover in the Congress in history in 2014.

If they allow this to happen - the majority of them will be out of a job in two years.

The Fiscal Cliff was never anything but a stalling tactic to see who won the 2012 election. Now that it is over, they will work together to be able to run in 2014 and 2016 on accomplishments.

The debate in 2016 will be whether the Republican House or the Democratic administration is the hero for getting the economy back on track.


User currently offlineDeltaMD90 From United States of America, joined Apr 2008, 7908 posts, RR: 51
Reply 6, posted (1 year 9 months 3 weeks 6 days 9 hours ago) and read 2144 times:

Quoting Dreadnought (Reply 4):
will only produce around $80 billion per year of additional revenue

I know you are often overlooked on this site (let's face it, we are some of the most right-leaning on this site,) but this is a MAJOR concern I see unanswered in many threads. I see the argument of increasing revenue and lowering spending as a compromise, but there aren't nearly enough spending cuts! The Dems are quick to single out defense, which I agree can see a major haircut, but no, we need real cuts, and it will have to be painful... to both sides...

In addition, there is going to need to be a LOT more spending cuts than any revenue raises. We are that much in the hole. That puts the GOP in a sticky spot. I am no fan of their recent behavior, but I can see their gripe with the spending levels the way they are. If only they would compromise more!!!



Ironically I have never flown a Delta MD-90 :)
User currently offlineArrow From Canada, joined Jun 2002, 2676 posts, RR: 2
Reply 7, posted (1 year 9 months 3 weeks 6 days 9 hours ago) and read 2126 times:
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Quoting Dreadnought (Reply 4):
The "fiscal cliff" everyone is talking about - that's nothing. A little bad PR, but 90% of Americans won't even notice any difference. The real fiscal cliff is coming in another couple of years, when the treasury starts having to raise interest rates.

Bingo.

I think you should go over the cliff. One of our politicians 20 years ago, when Canada was in this pickle, talked about "short term pain for long term gain." The last thing the global economy needs is yet another US band-aid designed to put the real decisions off to another year. Sooner or later, ya gotta pay the piper -- and when those interest rates start to climb that debt/deficit combo will drive the country into bankruptcy almost overnight. You think the cliff is bad? Watch what happens in a year's time if you don't go over it.



Never let the facts get in the way of a good story.
User currently offlinePu From Sweden, joined Dec 2011, 697 posts, RR: 13
Reply 8, posted (1 year 9 months 3 weeks 4 days 15 hours ago) and read 2010 times:

The Pu Institute now supports driving full speed off the fiscal cliff.

1. It magnificently reduces the deficit.
2. Long term debt is significantly reduced.
3. The chances of recession in 2013 are increased, but I say: so be it.
....I'm not convinced that it would lead to recession.


The smaller deficit (CBO Baseline) is what driving off the fiscal cliff does, the larger deficit (alternative fiscal scenario) is what happens by renewing the Bush tax cuts and cancelling the mandated budget-control-act spending reductions.

going off the "fiscal cliff" vastly reduces deficit


User currently offlineseb146 From United States of America, joined Nov 1999, 11657 posts, RR: 15
Reply 9, posted (1 year 9 months 3 weeks 4 days 14 hours ago) and read 1992 times:

How much waste, fraud and abuse were taken care of from Medicare to get money for Affordable Care Act? Why not, in addition to increasing revenue, cut waste, fraud and abuse in all sectors of govenment. Like billions from the military for systems that do not work and have not worked for years.

Just for example.



Life in the wall is a drag.
User currently offlineKen777 From United States of America, joined Mar 2004, 8278 posts, RR: 8
Reply 10, posted (1 year 9 months 3 weeks 4 days 12 hours ago) and read 1970 times:

Quoting seb146 (Reply 9):

How much waste, fraud and abuse were taken care of from Medicare to get money for Affordable Care Act?

Since being on Medicare I have been pleasantly surprised at the continual requests from the program to let them know if there are charges that are not valid - or are questionable.

Problems of fraud today are new "companies" filing false claims. Store front operators operating out of an empty store. The most important thing for us to do is to ensure significant prison terms for those caught, making obvious examples of them. Maybe add in a reward for identifying the crooks.


User currently offlinezippyjet From United States of America, joined Sep 2001, 5478 posts, RR: 12
Reply 11, posted (1 year 9 months 3 weeks 4 days 11 hours ago) and read 1951 times:

Recently I had a nightmare that the awful I can't sing Capitol Steps did a rendition of the really cool tune by the Doors called The Crystal Ship But changed the title to The Fiscal Cliff of course also changing the song's lyrics. Don't blame or hate on me if they do this, I didn't tell them!


I'm Zippyjet & I approve of this message!
User currently offlineAesma From France, joined Nov 2009, 6661 posts, RR: 11
Reply 12, posted (1 year 9 months 3 weeks 2 days ago) and read 1877 times:

Dreadnought, what you describe is what happened to Greece. The US can however print money, unlike Greece, and like you said the Fed buys bonds like there is no tomorrow, unlike the ECB at first (now it's doing it too).

So if the worst happen I expect the dollar to fall, which might not even be that bad for the economy, very bad for people owning things however.



New Technology is the name we give to stuff that doesn't work yet. Douglas Adams
User currently offlineDreadnought From United States of America, joined Feb 2008, 8841 posts, RR: 24
Reply 13, posted (1 year 9 months 3 weeks 1 day 23 hours ago) and read 1869 times:

Quoting Aesma (Reply 12):
So if the worst happen I expect the dollar to fall, which might not even be that bad for the economy, very bad for people owning things however.

Ask Weimar Germany how well it worked, or Argentina, Brazil, Turkey and other countries that inflated their way out of debt.

I don't question that it's a way to get rid of national debt - but it is an extraordinary act of selfishness on the part of government, who are supposed to look after the people's interest rather than their own.



Veni Vidi Castratavi Illegitimos
User currently offlinePu From Sweden, joined Dec 2011, 697 posts, RR: 13
Reply 14, posted (1 year 9 months 3 weeks 1 day 22 hours ago) and read 1859 times:

Quoting Dreadnought (Reply 13):
Ask Weimar Germany how well it worked, or Argentina, Brazil, Turkey and other countries that inflated their way out of debt.

Textbook regurgugation from 30-50 years ago, never an original thought... Ever going to join us in 2012?

Which one of those countries had the world's leading currency, demanded in the trillions OVERSEAS for trade, and used to denominate oil sales, and was the basis of trillions in eurodollor deposits, and used in the trillions for currency trading, and stock trading, and commodities trading, and was backed by a government with the world's most influential political and military ability?

There is ZERO evidence that in America's case printing currency, monetising debt, reducing bank reserve requirements, lowering interest rates and so forth cause inflation for America.

....you just don't like it for ideological reasons.


Pu

[Edited 2012-12-01 08:37:32]

User currently offlineKen777 From United States of America, joined Mar 2004, 8278 posts, RR: 8
Reply 15, posted (1 year 9 months 3 weeks 1 day 21 hours ago) and read 1841 times:

Quoting Aesma (Reply 12):
So if the worst happen I expect the dollar to fall

The dollar has already fallen. Remember when the Euro was worth less than US 90 cents? Now it's just under $1.30


User currently offlineDreadnought From United States of America, joined Feb 2008, 8841 posts, RR: 24
Reply 16, posted (1 year 9 months 3 weeks 1 day 21 hours ago) and read 1834 times:

Quoting Pu (Reply 14):
Textbook regurgugation from 30-50 years ago, never an original thought... Ever going to join us in 2012?

Which one of those countries had the world's leading currency, demanded in the trillions OVERSEAS for trade, and used to denominate oil sales, and was the basis of trillions in eurodollor deposits, and used in the trillions for currency trading, and stock trading, and commodities trading, and was backed by a government with the world's most influential political and military ability?

There is ZERO evidence that in America's case printing currency, monetising debt, reducing bank reserve requirements, lowering interest rates and so forth cause inflation for America.

....you just don't like it for ideological reasons.

There is an old saying about "Those who refuse to learn from history are doomed to repeat it." It is a historical and logical fact that AOTBE increasing the monetary supply beyond real economic growth leads to inflation, and that the impact may be delayed by recession and high unemployment. It cannot be avoided in the long term. Your suggestion that "that was then, this is now" is tantamount to claiming that 2+2=5. Put that argument in front of any reputable economist and he will laugh in your face.

http://www.forexblog.org/wp-content/uploads/2009/07/us-money-supply-and-inflation-link.png

Note these are 10 year moving averages, so we are way ahead of the curves. But your claim that somehow we have broken the cycle is unfounded, and driven by YOUR ideology.

M1 alone has increased by 13% in the past year, and the overall monetary base has increased some 30% over the past 4 years. With economic growth where it is, you have about 25% pent-up devaluation, and we have already seen some of that impact on forex markets. The only reason that it is somewhat under the radar is that the EU, Japan and others have their own monetary problems, but compare the dollar to a well-managed currency, like Switzerland. The dollar is down 20% against the Swiss Franc and continuing to fall.

The people that lose are the people with positive net worth (i.e. those who own more than they owe.)



Veni Vidi Castratavi Illegitimos
User currently offlinePu From Sweden, joined Dec 2011, 697 posts, RR: 13
Reply 17, posted (1 year 9 months 3 weeks 1 day 20 hours ago) and read 1830 times:

Quoting Dreadnought (Reply 16):
There is an old saying about "Those who refuse to learn from history are doomed to repeat it."

There is an old saying about those with inferiority complexes who spend 7000+ posts on chat forums trying to convince teenagers they are experts on economics, but why invoke old sayings?

Quoting Dreadnought (Reply 16):
Your suggestion that "that was then, this is now" is tantamount to claiming that 2+2=5.

Economics is the sutdy of human behaviour, and its laws evolve over time, there are no constants that remain in place through the ages. The reason why the world went into financial crisis in 2008 was in large part because of devotion to outdated thoughts on economics, namely that a laissez-faire approach works best, that the market itself fixes all wrongs.

Quoting Dreadnought (Reply 16):
Note these are 10 year moving averages, so we are way ahead of the curves. But your claim that somehow we have broken the cycle is unfounded, and driven by YOUR ideology.
According to your own graph, CPI has been falling since 1980, despite the upturn in money supply THAT BEGAN 17 YEARS AGO. Presumably because people like you didn't like this fact, the group "shadowstats" you use here created their own "corrected" CPI figure that obediently starts to rise in the early 2000s....even as the REAL CPI SHOWS LITTLE MOVEMENT.

I'm all far reducing spending, cutting the deficit. My only point is that there is NO EVIDENCE that Obama's big spending/big taxing ideas will bring the catastrophe you hope for in your eternal crusade against the Democrats. Western Europe is taxed a lot more and the government share of GDP is much higher....yet no disasters.

Quoting Dreadnought (Reply 16):
The people that lose are the people with positive net worth (i.e. those who own more than they owe.)

In other words white angry old men, Republicans, Mitt Romney, etc...; the ONLY people who have seen their income and wealth grow for the last 30 years....


Pu

[Edited 2012-12-01 09:57:06]

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