2016 Postmortem
Related: About this forumWhy Washington’s “Fiscal Cliff” is a Myth
They dont call it the cliff for nothing. Its the fiscal spot where a nations representatives can gather and cry doom. Its the place if Washington is to be believed where, with a single leap into the Abyss of Sequestration, those representatives can end it all for the rest of us.
In the wake of President Obamas electoral victory, that cliff (if youll excuse a mixed metaphor or two) is about to step front and center. The only problem: the odds are no one will leap, and remarkably little of note will actually happen. But since the headlines are about to scream crisis, what you need to understand American politics in the coming weeks of the lame-duck Congress is a little guide to reality, some Cliff Notes for Washington.
As a start, relax. Dont let the headlines get to you. Theres little reason for anyone to lose sleep over the much-hyped fiscal cliff. In fact, if you were choosing an image based on the coming fiscal dust-up, it probably wouldnt be a cliff but an obstacle course a series of federal spending cuts and tax increases all scheduled to take effect as 2013 begins. And its true that, if all those budget cuts and tax increases were to go into effect at the same time, an already weak recovery would probably sink into a double-dip recession.
But ignore the sound and fury. While prophecy is usually a perilous occupation, in this case its pretty easy to predict how lawmakers will deal with nearly every challenge on the presidents and Congresss end-of-year obstacle course. The upshot? The U.S. economy isnt headed over a cliff any time soon.
http://billmoyers.com/content/why-washingtons-fiscal-cliff-is-a-myth/
Dubster
(427 posts)boingboinh
(290 posts)Ssshhh.
Filibuster Harry
(666 posts)It will be interesting to see how this works out though. We have tax rates increasing and tax credits expiring. It would be very interesting if someone, anyone , could at least explain some specifics if nothing is agreed upon: for instance, dividends would be taxed at ordinary rates (not 0% or 15% maximum); american opportunity credit (maximum of $ 2,500.-) would expire.
Pressure is on both the white house and the house of representatives. In my opinion, it is more on the house since the president was re-elected. And his plan, as I understand it, would keep the dividends tax rate at 15% and 20% while increasing the higher tax rates from 33% and 35% to 36% and 39.5% respectively. Now he could compromise and raise the rates but to a lower rate.
The house republicans depending on what happens could be blamed for raising taxes on everybody (a sure problem in the 2014 election) or raise taxes on the wealthy (a sure primary from the tea party and Grover).
2 years ago the president was in this same situation with the Rs holding unemployment benefits hostage to keeping lower tax rates. Raising rates would have been a sure loss for the president. But now he is re-elected and the people believe tax rates at the high end must go up as well as spending cuts in order to tackle the deficit. The Rs never saw this coming. They better get their act together and stand up to Grover in numbers.
If they don't pass anything they can always do it in January and retroactively -- a good way out.